US v. Floyd, Crim. No. 3:92-CR-0519-H.

• Decision Date: 23 February 1993
• Docket Number: Crim. No. 3:92-CR-0519-H.
• Citation: 814 F. Supp. 1355
• Parties: UNITED STATES of America v. Charles G. FLOYD, Jr. (1).
• Court: U.S. District Court — Northern District of Texas

814 F. Supp. 1355

UNITED STATES of America v. Charles G. FLOYD, Jr. (1).

Crim. No. 3:92-CR-0519-H.

United States District Court, N.D. Texas, Dallas Division.

February 23, 1993.

COPYRIGHT MATERIAL OMITTED

Robert L. Webster, James S. Hinkle and John W. Scott, Asst. U.S. Attys., Dallas, TX, for U.S.

Michael Fawer, Dallas, TX, for Floyd.

MEMORANDUM OPINION AND ORDER

SANDERS, Chief Judge.

Before the Court is the Government's Motion to Enforce Order for Repatriation of Assets, filed January 20, 1993; the Government's Motion for a Restraining Order, filed January 26, 1993; and a Motion to Quash Subpoena and supporting brief, filed by United Bank of Lancaster on February 1, 1993.

On February 2, 1993, the Court held a hearing on the Government's application for a preliminary injunction under Section 853(e) of Title 21, United States Code. The Government seeks to "restrain Charles G. Floyd, Jr., his agents, servants, employees, attorneys and all other persons acting in concert with him, from disposing, moving, or encumbering in any way" the following assets: (1) about $259,331 in funds repatriated from Liechtenstein by Court order and now in the Registry of the Court; (2) about $142,388 in funds similarly repatriated and now in the Registry of the Court; (3) a cashier's check for $37,565 alleged to have been sent to Floyd's attorney on January 4, 1993; and (4) any other "cash, moneys, funds on deposit, cashier's checks" in Floyd's possession or control. Gvt's Mot. at 2. The Government asks the Court to maintain these assets in the Court's registry pending Floyd's criminal trial. Gvt's Mot. at 2-3.

For the reasons given below, the Court holds the following: (1) the Government has shown a substantial likelihood of obtaining post-conviction forfeiture of a cashier's check for $450,000, one of three assets alleged to be subject to forfeiture under Floyd's indictment; (2) the Government has shown a substantial likelihood of obtaining post-conviction forfeiture of Floyd's "substitute" property in the amount of $450,000; and (3) the Government may restrain that "substitute" property prior to trial.

Accordingly, the Government's motion for a preliminary injunction is GRANTED in part and DENIED in part. The Government will maintain in the Court's registry the approximately $401,000 in funds already deposited. The Government may restrain Floyd's other property, or may require other funds to be deposited into the Court's registry, up to a total amount, including the funds now in the registry, of $450,000.

I. BACKGROUND

On December 17, 1992, an indictment was returned against Charles G. Floyd, Jr., formerly President and Chief Executive Officer of United Bank in Lancaster. Floyd is sole owner of United Banks's parent company, Lancaster Bancshares, Inc. The criminal charges against him include eight counts of offenses related to banking, including unlawful receipt of funds, unlawful participation, misapplication of funds, money laundering, and conspiracy to defraud the United States.¹

The charges stem from a transaction on January 2, 1990, in which Floyd served as loan officer for four loans of $490,000 each, totaling $1,960,000. The Government alleges that the loans were illegally made to four entities related to or controlled by Co-Defendant Thomas Gaubert. Further, the Government alleges that Floyd illegally received and laundered $450,000 of a $640,000 deposit made by Gaubert into a checking account at Red Oak State Bank from proceeds of the loans. The $450,000 is alleged in the indictment to have been a reward to Floyd for causing United Bank to fund the four loans.

Count 11 of the indictment charges Floyd with liability for post-conviction forfeiture under Section 982(a)(1) of Title 18, United States Code, of the $450,000 cashier's check and of the remainder of the approximately $640,000 deposited to the account at Red Oak State Bank. Count 11 also states the Government's intent to hold Floyd liable for post-conviction forfeiture of any of his property to substitute for the named property should it be unavailable. Count 12 of the indictment charges Floyd with liability for forfeiture of the four loans, totaling $1,960,000. It too states the Government's intent to obtain forfeiture of any of Floyd's assets as substitute for the named property should it then be unavailable.

On January 11, 1993, the Government applied for an ex parte protective order under Section 853(e), Title 21, United States Code. In its motion, the Government asked the Court for three actions: (1) to repatriate certain funds totalling about $401,000 that Floyd had previously wired to two accounts in a Liechtenstein bank; (2) to allow the seizure of a $37,000 cashier's check drawn in Floyd's name and held by his attorney; and (3) generally, to restrain Floyd or any of his associates or family from disposing of or diminishing the value of any of his property. The Court denied the Government's motion with respect to the final two requests but granted the order for repatriation of the Liechtenstein funds by Order of January 13, 1993. On February 1, 1993, Floyd deposited the two checks into the Registry of the Court. By the Court's Order of February 3, 1993, and by agreement of the parties, the checks have remained in the Registry pending the Court's decision on the Government's motion for preliminary injunction.

II. PRETRIAL RESTRAINT OF SUBSTITUTE ASSETS

Before reaching the merits of the Government's motion for preliminary injunction, the Court must decide the threshold issue of whether the Government may apply under Section 853(e) of Title 21, United States Code, for pretrial restraint of "substitute" property. The property at issue before the Court is not, as the Government concedes, directly subject to forfeiture under Section 982(a) of Title 18. Rather, it is "substitute" property, which is subject to post-conviction forfeiture under Section 853(p) of Title 21 only under certain conditions. The parties dispute whether § 853(e) authorizes restraint of substitute assets prior to trial. A brief review of the relevant statutes is necessary before proceeding further.

Section 982(a) of Title 18, United States Code, authorizes forfeiture of certain property on conviction for the crimes with which Defendant Floyd is indicted in this case. Such property is variously defined, depending on the offense, but must, generally speaking, be involved in or flow from the offense to be subject to forfeiture.² Should that property be unavailable following conviction, section 853(p) of Title 21, United States Code, authorizes forfeiture of any other of a defendant's property in substitution for the property described in § 982(a), up to the amount of its value.³ Property forfeitable after conviction under § 853(p) is referred to as "substitute" property.

Under certain circumstances, the property described in § 982(a) is subject not only to post-conviction forfeiture but also to restraint prior to the trial. Authorizing that action is section 853(e) of Title 21:

(1) Upon application of the United States, the court may enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property described in subsection (a) of this section for forfeiture under this section—

(A) upon the filing of an indictment ... alleging that the property with respect to which the order is sought would, in the event of conviction, be subject to forfeiture under this section....

21 U.S.C. § 853(e)(1)(A).

The question before the Court is whether substitute property too is subject to pretrial restraint under § 853(e) above. Defendant Floyd argues that the reference in § 853(e) above to the property "described in subsection (a)"⁴ precludes pretrial restraint of substitute property, which is defined only in § 853(p). The Court disagrees. Congress's sole purpose of allowing pretrial protective orders under § 853(e) is "to preserve the status quo, i.e., to assure the availability of the property pending disposition of the case." S.Rep. No. 225, 98th Cong., 2nd Sess. 204 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3387. To accomplish that purpose, § 853 must be read as a whole. The Court holds that § 853(e) allows the Government to apply for pretrial restraint of substitute assets that would be subject to post-conviction forfeiture under § 853(p).

In so holding, the Court relies on the reasoning of the Fourth Circuit decision of In re Billman, 915 F.2d 916 (4th Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 2258, 114 L.Ed.2d 711 (1991). In Billman, the court allowed pretrial restraint of substitute assets under the RICO forfeiture statute, which is identical in relevant subsections to the forfeiture provisions of § 853. The Billman court observed that forfeiture under the RICO statute, as under § 853 in this case, is an in personam proceeding; it is intended to constitute "partial punishment for the offense." Id. at 920; see S.Rep. No. 225, 98th Cong., 2nd Sess. 202, 204, reprinted in 1984 U.S.C.C.A.N. 3182, 3385, 3387. A forfeiture provision should be "`liberally construed to effectuate its remedial purposes.'" Id. at 921 (quoting Russello v. United States, 464 U.S. 16, 26-27, 104 S.Ct. 296, 302, 78 L.Ed.2d 17 (1983)). Accordingly, the Billman court held:

The pretrial restraining provisions of the forfeiture statute do not permit a defendant to thwart the operation of forfeiture laws by absconding with RICO proceeds and then transferring his substitute assets to a third person....

Id. at 921.

This Court is of the view that the same should be said about section 853(e) of Title 21, the identical statute governing forfeiture for offenses under section 982 of Title 18. Denying the Government the right to restrain substitute property in advance of trial allows a defendant to circumvent Congress's express intent by disposing of forfeitable assets between the time of indictment and the time of...