United States v. Mageean, No. CR-R-84-67-ECR.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada
Writing for the CourtPaul G. Sloan, Jeffrey S. Ross, San Francisco, Cal., and John L. Conner, Reno, Nev., for defendant
Citation649 F. Supp. 820
PartiesUNITED STATES of America, Plaintiff, v. James Vernon MAGEEAN, Defendant.
Decision Date24 November 1986
Docket NumberNo. CR-R-84-67-ECR.

649 F. Supp. 820

UNITED STATES of America, Plaintiff,
v.
James Vernon MAGEEAN, Defendant.

No. CR-R-84-67-ECR.

United States District Court, D. Nevada.

Order and Minute Order October 10, 1986.

Supplemental Order and On Petitions to Adjudicate Claims November 24, 1986.


Donald Cavin Hill, Asst. U.S. Atty., Reno, Nev., for plaintiff.

Paul G. Sloan, Jeffrey S. Ross, San Francisco, Cal., and John L. Conner, Reno, Nev., for defendant.

ORDER

EDWARD C. REED, JR., Chief Judge.

FACTS

On March 12, 1986, James Vernon Mageean was found guilty of violations of the RICO statute, 18 U.S.C. § 1962(c) and (d). The acts giving rise to this conviction occurred between April of 1978 and May of 1984. Following the conviction, the Court ordered forfeiture of 100% of the shares of Ark Distributing Company, Inc., (Ark), an enterprise engaged in racketeering activities. Pursuant to 18 U.S.C. § 1963(m)(1), the United States gave notice of the forfeiture both by publication and by direct notice to interested third parties.

On December 23, 1985, an airplane in which Ark owned an interest crashed into the Sun Valley Shopping Center in Concord, California. The crash caused seven deaths and several injuries. Suits have been filed on behalf of several of those injured in California state court against

649 F. Supp. 821
Ark and other defendants. The state court action has been stayed pending determination by this Court of the tort claimants' rights against Ark's assets

Several of these tort claimants have also filed petitions to adjudicate their claims in the forfeited property of Ark pursuant to 18 U.S.C. § 1963(m). These tort claimants now move this Court for an order requiring that the assets of Ark be held intact until the rights of all lawful claimants are determined. Notice of the setting of the hearing on this motion was given by order of the Court on August 16, 1986.

The United States Attorney has petitioned this Court for an order approving the settlement of five claims made pursuant to 18 U.S.C. § 1963(m). The government also requests that the Court authorize the disposition of the assets involved and the division of proceeds from such sales.* The claimants include Friedman, Sloan & Ross, P.C., a law firm which represents Ark in an ongoing civil litigation, and four parties claiming to have security interests in property held by Ark. In exchange for withdrawing their claims against Ark, the settlements contemplate that these claimants will be paid off by the government. In connection with their motion to require that Ark's assets be held intact, the tort claimants have petitioned the Court to stay these settlements so that the assets of Ark may be preserved until their claims are adjudicated.

Several other unsecured parties have filed petitions to adjudicate their interests in the forfeited property. The Court notes, however, that none of these parties have joined the tort claimants' motions to hold Ark's assets intact and to stay the government's proposed settlements.

DISCUSSION

Two issues are raised by the tort claimants' motions to freeze Ark's assets. First, the Court must determine what assets were forfeited to the United States pursuant to this Court's forfeiture order. And second, it must be determined whether, under the circumstances of this case, this Court has the authority to grant the relief requested by the tort claimants.

Although the forfeiture order explicitly applied only to 100% of the stock in Ark, the government and all other interest parties have acted as if the corporation's assets themselves were also forfeited. Therefore, the Court must determine the extent of the forfeiture order.

It appears that there are no cases which decide whether the forfeiture of stock is equivalent to forfeiture of the underlying assets, although the issue has been raised by other courts. See United States v. Ambrosio, 575 F.Supp. 546, 549 (E.D.N.Y. 1983). The statute and its legislative history, however, provide guidance. 18 U.S.C. § 1963(a) and (b) read:

(a) Whoever violates any provision of section 1962 of this chapter shall be fined not more than $25,000 or imprisoned not more than twenty years, or both, and shall forfeit to the United States, irrespective of any provision of State law —
(1) any interest the person has acquired or maintained in violation of section 1962;
(2) any —
(A) interest in;
(B) security of;
(C) claim against; or
(D) property or contractual right of any kind affording a source of influence over;
any enterprise which the person has established, operated, controlled, conducted, or participated in the conduct of in violation of section 1962; and
(3) any property constituting, or derived from, any proceeds which the person obtained, directly or indirectly, from racketeering activity or unlawful debt collection in violation of section 1962.
The court, in imposing sentence on such person shall order, in addition to
649 F. Supp. 822
any other sentence imposed pursuant to this section, that the person forfeit to the United States all property described in this subsection. In lieu of a fine otherwise authorized by this section, a defendant who derives profits or other proceeds from an offense may be fined not more than twice the gross profits or other proceeds.
(b) Property subject to criminal forfeiture under this section includes —
(1) real property, including things growing on, affixed to, and found in land; and
(2) tangible and intangible personal property, including rights, privileges, interests, claims and securities.

18 U.S.C. § 1963(a) and (b) (emphasis added).

Congress intended to emphasize the mandatory nature of criminal forfeiture by directing that the courts "shall" order forfeiture of all property described in § 1963(a). S.Rep. No. 225, supra, at 3383. See also United States v. Kravitz, 738 F.2d 102, 104-105 (3rd Cir.1984), cert. denied, 470 U.S. 1052, 105 S.Ct. 1752, 84 L.Ed.2d 816 (1985). It is also clear that Congress intended that the concept of "property" as used in § 1963 to be broadly construed. S.Rep. No. 225, 98th Cong., 2d Sess., reprinted in 1984 U.S. Code Cong. & Ad. News 3182, 3374, 3383. In this case, all of Ark's assets fall within § 1963(a)'s description of property. Moreover, since Ark, as an enterprise, was involved in racketeering activities, and since its assets constitute proceeds from that activity, the entire enterprise could have been forfeited to the United States. See United States v. Thevis, 474 F.Supp. 134, 144-145 (N.D.Ga. 1979) aff'd, 665 F.2d 616 (5th Cir.1982), cert. denied, 458 U.S. 1109, 102 S.Ct. 3489, 73 L.Ed.2d 1370 (1981) (if the government shows that each of a corporation's assets contributed to or were utilized in forwarding racketeering activities, then forfeiture of all of its assets would be proper). Therefore, the Court finds that the assets of Ark were forfeited to the United States pursuant to the forfeiture order of March 13, 1986.

The Court will now address the issue of whether it has the authority to order that the assets of Ark be held intact and that the execution of the proposed settlements be stayed pending determination of the lawful claims made against those assets. The Court notes at the outset that under 18 U.S.C. § 1963 its authority is very limited. With regard to claims made by third parties asserting an interest in forfeited property, the Court merely has the power to determine the validity of the claims and to amend the order of forfeiture in accordance with its determination. 18 U.S.C. § 1963(m). The Court notes, however, that it may have an adjunct power to stay the disposition of forfeited property pending its adjudication of third party claims even though the statute gives no express authority for such actions. But even assuming arguendo that this Court holds this power, it could only be exercised in circumstances where the Court's jurisdiction to adjudicate claims cognizable under 18 U.S.C. § 1963(m)(6)(A) and (B) is at issue. Therefore, for purposes of this motion, it is necessary to determine whether the tort claimants have any interest under the statute in the forfeited assets of Ark.

This Court appears to be writing on a clean slate on the issue of whether tort claimants have a judicially cognizable interest in forfeited property under 18 U.S.C. § 1963. The legislative history of the 1984 amendments to § 1963 and cases in other areas, however, are instructive on this issue.

Prior to the 1984 amendments, third parties asserting an interest in forfeited property could seek redress only by petitioning the Attorney General. S.Rep. No. 225, supra, at 3374, 3390. Congress enacted 18 U.S.C. § 1963(m) so that certain third parties challenging the validity of a forfeiture order could instead petition the courts to adjudicate the validity of their interests. As part of this scheme, Congress created two statutory categories of claimants entitled to have the Court amend its forfeiture

649 F. Supp. 823
order if they proved their claims. The two categories recognized by the statute are
(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section ...

18 U.S.C. § 1963(m)(6).

In enacting subsection (m), Congress recognized that since criminal forfeiture actions are in personam proceedings, a forfeiture order would be invalid if it reached a third party's interest in property which was either exclusive of or...

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52 practice notes
  • United States v. Dupree, No. 10–CR–627 (KAM).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • January 28, 2013
    ...a district court decision that general creditors had standing to bring claims under 18 U.S.C. § 1963.16822 F.2d 62 (9th Cir.1987), aff'g649 F.Supp. 820, 829 (D.Nev.1986). On the basis of Reckmeyer and Mageean, Griffin argues that despite being, as she admits, a general creditor, she should ......
  • U.S. v. Campos, O-M
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • December 2, 1988
    ...Reckmeyer, 836 F.2d200 (4th Cir.1987) (petition for cert. filed April 11, 1988 (Nos. 86-5037/5070/5089)), and United States v. Mageean, 649 F.Supp. 820 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987). Both of these courts found that general, unsecured creditors may have cogn......
  • U.S. v. Bcci Holdings (Luxembourg) S.A., Crim. Action No. 91-0655 (JHG).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • February 13, 1997
    ...the petition without providing a hearing. See United States v. Campos, 859 F.2d 1233, 1240 (6th Cir.1988); United States v. Mageean, 649 F.Supp. 820, 825 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987); S.Rep. No. 225, 98th Cong., 1st Sess. 191, 208 n. 46 (Sept. 12, 1983), U......
  • U.S. v. Bcci Holdings (Luxembourg), S.A., Crim. Action No. 91-0655(JHG).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 20, 1996
    ...the petition without providing a hearing. See United States v. Campos, 859 F.2d 1233, 1240 (6th Cir.1988); United States v. Mageean, 649 F.Supp. 820, 825 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987); S.Rep. No. 225, 98th Cong., 1st Sess. 191, 208 n. 46 (Sept. 12, The part......
  • Request a trial to view additional results
52 cases
  • United States v. Dupree, No. 10–CR–627 (KAM).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • January 28, 2013
    ...a district court decision that general creditors had standing to bring claims under 18 U.S.C. § 1963.16822 F.2d 62 (9th Cir.1987), aff'g649 F.Supp. 820, 829 (D.Nev.1986). On the basis of Reckmeyer and Mageean, Griffin argues that despite being, as she admits, a general creditor, she should ......
  • U.S. v. Campos, O-M
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • December 2, 1988
    ...Reckmeyer, 836 F.2d200 (4th Cir.1987) (petition for cert. filed April 11, 1988 (Nos. 86-5037/5070/5089)), and United States v. Mageean, 649 F.Supp. 820 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987). Both of these courts found that general, unsecured creditors may have cogn......
  • U.S. v. Bcci Holdings (Luxembourg) S.A., Crim. Action No. 91-0655 (JHG).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • February 13, 1997
    ...the petition without providing a hearing. See United States v. Campos, 859 F.2d 1233, 1240 (6th Cir.1988); United States v. Mageean, 649 F.Supp. 820, 825 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987); S.Rep. No. 225, 98th Cong., 1st Sess. 191, 208 n. 46 (Sept. 12, 1983), U......
  • U.S. v. Bcci Holdings (Luxembourg), S.A., Crim. Action No. 91-0655(JHG).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 20, 1996
    ...the petition without providing a hearing. See United States v. Campos, 859 F.2d 1233, 1240 (6th Cir.1988); United States v. Mageean, 649 F.Supp. 820, 825 (D.Nev.1986), aff'd without opinion, 822 F.2d 62 (9th Cir.1987); S.Rep. No. 225, 98th Cong., 1st Sess. 191, 208 n. 46 (Sept. 12, The part......
  • Request a trial to view additional results

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