United States v. Schippers

• Decision Date: 01 November 2013
• Docket Number: Case No. 4:12–mj–135.,Criminal No. 4:12–cr–131.
• Citation: 982 F.Supp.2d 948
• Parties: UNITED STATES of America, Plaintiff, v. Ralph L. SCHIPPERS, Defendant.
• Court: U.S. District Court — Southern District of Iowa

982 F.Supp.2d 948

UNITED STATES of America, Plaintiff,
v.
Ralph L. SCHIPPERS, Defendant.

Criminal No. 4:12–cr–131.
Case No. 4:12–mj–135.

United States District Court,
S.D. Iowa,
Central Division.

Nov. 1, 2013.

[982 F.Supp.2d 952]

Andrew H. Kahl, Maureen McGuire, United States Attorney's Office, Des Moines, IA, for Plaintiff.

Timothy Francis McCarthy, II, McCarthy & Hamrock, PC, West Des Moines, IA, for Defendant.

ORDER
JOHN A. JARVEY, District Judge.
I. INTRODUCTION

This matter comes before the Court pursuant to two objections—one to a restitution order and another to a writ of garnishment—filed by Marla Schippers (“Marla”).¹ The first objection was filed on February 7, 2013. Marla objected to this Court's order dated February 5, 2013, directing that the proceeds from the sale of her marital home ($38,766.96) be paid toward restitution owed by her former husband, Defendant Ralph Schippers (“Ralph”). [Dkt. No. 5 Page 2, Order No. 4:12–mj–135.] The second objection was filed on April 4, 2013. Marla objected to a writ of garnishment relating to Ralph's 401–K account dated March 27, 2013.² [Dkt. No. 36 Page 2.] In her objections, Marla alleges that she was awarded one-half of these assets in a decree of dissolution of marriage on August 23, 2012. In addition, Marla argues that she is entitled to one-half of the net proceeds from the sale of the marital home based on a statutory dower interest. Accordingly, she requests that one-half of the proceeds from the sale of the marital home and Ralph's 401–K account (“the subject properties”) be released to her. This Court held a hearing on her objections on April 24, 2013.

The Government filed a resistance to Marla's objection to the restitution order. [Dkt. No. 35.] On April 5, 2013, the Government also filed a response to Marla's objection to the garnishment of Ralph's 401–K account. [Dkt. No. 38.] The Government contends that the Court should deny any claim by Marla to the funds from the marital home or Ralph's 401–K account because Marla does not have an ownership

[982 F.Supp.2d 953]

interest in the subject properties, and the transfer of these assets in the divorce decree constituted fraudulent transfers. The Government argues that the subject properties should be applied in full to the restitution Ralph owes. This Court agrees, and it denies Marla's claims to the subject properties for two reasons.

First, Marla never acquired an ownership interest in the subject properties through her divorce decree because two federal district judges had issued restraining orders on the properties prior to the filing of the divorce petition that remained in effect until the end of Ralph's criminal case, when he was sentenced on January 17, 2013.³ Before the restraining orders were entered, Ralph owned the properties separately, and based on Iowa law, the property transfers made to Marla must be set aside because the conveyances were unreasonable, inequitable, and fraudulent. See Nichols v. Nichols, 526 N.W.2d 346, 348–49 (Iowa 1994); see also Travelers Indem. Co. v. Cormaney, 258 Iowa 237, 138 N.W.2d 50, 58 (1965). This Court also finds that Marla does not have a statutory dower interest in these assets as Marla is not married to Ralph, and Ralph is not deceased. See Freedom Financial Bank v. Estate of Boesen, 805 N.W.2d 802, 811 (Iowa 2011).

Second, the transfers of the subject properties through the divorce decree must be set aside as void because the transfers were fraudulent in violation of federal laws. In considering the factors under 28 U.S.C. § 3304(b)(2), this Court finds that Ralph had the “actual intent to hinder, delay, or defraud a creditor” under 28 U.S.C. § 3304(b)(1)(A): Marla was an “insider”; there were mounting criminal and civil suits against Ralph before the transfers were made; Ralph transferred substantially all of his assets to Marla; Ralph did not receive equivalent value for the transfers; Ralph was insolvent before and after the transfers occurred; and the transfer occurred shortly before Ralph incurred a substantial debt. See28 U.S.C. § 3304(b)(2); see also United States v. Sherrill, 626 F.Supp.2d 1267, 1274 (M.D.Ga.2009).

Federal courts have reached different conclusions as to whether a defendant had “actual intent” to fraudulently transfer property when confronted with similar “badges of fraud.” ⁴ However, even if

[982 F.Supp.2d 954]

Ralph did not commit actual fraud under § 3304(b)(1)(A), the Government is still entitled to the recovery it seeks as the transfers meet the statutory standard for constructive fraud under § 3304(b)(1)(B)(ii). The transfers were absent reasonably equivalent consideration, and Ralph “believed or reasonably should have believed he would incur debts beyond his ability to pay as they became due.” See28 U.S.C. § 3304(b)(1)(B)(ii); see also United States v. Woods, No. 5:07–CV–187–BR, 2008 WL 9375548, at *3 (E.D.N.C. Dec. 10, 2008).

The Mandatory Victims Restitution Act (“MVRA”) grants the Government the authority to use the collection procedures of the Federal Debt Collection Procedures Act (“FDCPA”) to enforce restitution ordered as part of a criminal sentence. See United States v. Yielding, 657 F.3d 722, 726–27 (8th Cir.2011); see also United States v. Witham, 648 F.3d 40, 49 (1st Cir.2011); United States v. Kollintzas, 501 F.3d 796, 800–01 (7th Cir.2007); United States v. Mays, 430 F.3d 963, 965–66 (9th Cir.2005); United States v. Phillips, 303 F.3d 548, 550–51 (5th Cir.2002). Based on the MVRA and FDCPA, Ralph's fraudulent transfers are set aside to satisfy Ralph's debts to Granger Motors and Universal Underwriters Insurance Company. Marla Schippers's requests to release one-half interests in the proceeds from the sale of the marital home and Ralph's 401–K account to Marla are DENIED.

II. FACTS

In approximately January of 1998, Ralph began embezzling money from his employer, Granger Motors. It was not until May of 2012 when Ralph's breach of his employer's trust came to light. At that time, Granger Motors reported Ralph's conduct to the Federal Bureau of Investigation (“FBI”), following which the FBI learned that Ralph embezzled over $1 million from Granger Motors. On May 18, 2012, Ralph's employment was terminated.

On June 28, 2012, U.S. District Court Judge Ronald Longstaff issued a restraining order with respect to Ralph's real property, his residence, until the end of Ralph's criminal case. [Dkt. No. 2, Order No: 4:12–mj–135.] The marital home was sold on July 20, 2012, and the net proceeds from the sale ($38,766.96) were placed in the Clerk of Court's registry. U.S. District Court Judge Harold Vietor issued a restraining order on August 7, 2012 to restrain Ralph or any family member from taking any action that would affect Ralph's 401–K account until Ralph's criminal case concluded. [Dkt. No 2, Order No: 4:12–mj–164.]

Shortly thereafter, on August 13, 2012, Ralph's wife, Marla, filed a petition for dissolution of marriage in the Iowa District Court for Dallas County. The decree included an agreement that Marla would

[982 F.Supp.2d 955]

receive one-half of Ralph's 401–K plan and one-half of the proceeds from the sale of their marital home. The decree of dissolution was filed on August 23, 2012, and it dissolved the marriage between Ralph and Marla.

On September 17, 2012, Ralph pleaded guilty to an information charging him with wire fraud. Seven days later, the same court that filed Marla and Ralph's divorce decree, entered an order nunc pro tunc recognizing the restraining orders that had been issued by the federal district courts on the subject properties in June and July of that year. [Dkt. No. 38–2 Page 1.] The order nunc pro tunc provided that any interest Marla had in Ralph's 401–K, and any interest Marla had in the proceeds from the sale of the marital house, were still subject to the federal court orders.

On January 17, 2013, Ralph was sentenced to a term of imprisonment of forty-one months. He was also ordered to pay restitution in the amount of $1,433,825.37. [Dkt. No. 26 Page 5.] On February 5, 2013, this Court entered an order that the funds held by the Clerk of Court be paid toward the restitution Ralph owed. On March 26, 2013, the Government requested that a writ of garnishment be issued to Fidelity Investments to garnish Ralph's 401–K account, and it was issued on March 27, 2013. Marla objected to this Court's orders, arguing that she was entitled to one-half of the funds based on a divorce decree.

III. DISCUSSION

This Court first addresses the issue of whether Marla can recover a one-half interest in the proceeds from a marital home and 401–K account based on a divorce decree. In resolving that issue, the Court makes two findings, which leads it to deny Marla's claims:

(1) Marla does not have an ownership interest in the subject properties based on her divorce decree because two federal district judges entered restraining orders on the properties before the divorce petition was filed that preserved the assets for future resolution. Prior to the entry of the restraining orders, the subject properties were Ralph's separate properties, and to distribute a one-half interest in the subject properties to Marla would be unreasonable, inequitable, and fraudulent under Iowa law. Additionally, Marla does not have a statutory dower interest in the properties as Marla is no longer Ralph's wife, and Ralph is not dead.

(2) The transfers in the divorce decree must be set aside because they were fraudulent under § 3304(b)(1)(A) and § 3304(b)(1)(B)(ii). The Government presented sufficient evidence to show that Ralph had the “actual intent to hinder, delay, or defraud a creditor.” See28 U.S.C. § 3304(b)(1)(A). Also, the transfers were made absent reasonably equivalent consideration, and Ralph “believed or reasonably should have believed he would incur debts beyond his ability to pay as they became due.” See id. § 3304(b)(1)(B)(ii).

A. Marla Schippers Has No Ownership Interest in the Subject Properties1. Marla Schippers's...