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United States v. Wong

United States District Court, D. Nebraska

March 2, 2015

UNITED STATES OF AMERICA, Plaintiff,
v.
MARY R. WONG, Defendant,
v.
ROBERT F. CRAIG, ATTORNEY AT LAW, Garnishee.

ORDER

THOMAS D. THALKEN, Magistrate Judge.

This matter is before the court on the defendant's, Mary R. Wong (Wong), and garnishee's, Robert F. Craig (Craig), Motion for Hearing (Filing Nos. 88 and 89) on the government's Writ of Continuing Garnishment (writ) (Filing No. 85). Craig objects to the garnishment (Filing No. 87 - Answer). The court held a hearing on January 21, 2015. Laurie M. Barrett, counsel for the government, Wong, and Craig appeared telephonically for the hearing. A transcript (TR.) of the hearing was filed on January 29, 2015. Thereafter, the government filed a brief (Filing No. 97) and index of evidence (Filing No. 96) in support of the garnishment. Craig filed a brief (Filing No. 98) and attachments (Filing Nos. 98-1 - 98-3) in opposition of the garnishment. The government filed a brief (Filing No. 101) in reply.

BACKGROUND

This garnishment action stems from Wong's December 20, 2010, conviction of securities fraud and sentence to pay $3, 035, 406.35 in restitution to eight victims of Wong's fraud. See TR. 3-4; Filing No. 79 - Judgment. Wong pleaded guilty to one count of securities fraud on September 27, 2010. See Filing No. 66. As of December 9, 2014, Wong has paid a $100 special assessment and $345 in restitution. See TR. 4.

On July 29, 2010, Williams and Bullocks, LLC, for which Wong was the sole managing member, filed a Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Nebraska. See Filing No. 97 - Gov't's Brief. John D. Stalnaker, as Trustee for the Estate of Williams and Bullocks, LLC, alleged that a $150, 000 refundable membership deposit held by Exclusive Resorts was property of the bankruptcy estate and filed an Adversary Proceeding against Wong seeking to determine the ownership of the funds. Id. at 3-4. Wong claimed the $150, 000 refundable membership deposit as her personal asset. Id. On September 26, 2014, Trustee Stalnaker filed a motion to approve a compromise in the bankruptcy case, wherein the parties agreed to resolve the issue of the ownership of the $150, 000 refundable membership deposit pursuant to terms set forth in a settlement agreement. Id.; Filing No. 87 Ex. 3 - Settlem. Agr. The Settlement Agreement provided, in part, the estate would receive $50, 000 of the $150, 000 and the remaining $100, 000 would be paid to Craig's client trust account. See Filing No. 87 Ex. 3 - Settlem. Agr. The Settlement Agreement acknowledged the law firm Rasmussen & Mitchell asserted a security interest in the funds, to the extent the funds were property of Wong. Id. The Settlement Agreement was signed by Trustee Stalnaker and Father Michael Voithofer (Fr. Michael), as Attorney in Fact for Wong. Id. The bankruptcy court approved the settlement on November 19, 2014. See Filing No. 97 - Gov't's Brief p. 4.

On December 1, 2014, the government commenced garnishment proceedings on Craig to obtain the balance of Wong's bankruptcy recovery toward payment of her criminal judgment pursuant to the Federal Debt Collection Procedures Act (FDCPA). Id. at 5 (citing 28 U.S.C. § 3001, et seq. ); see also Filing No. 82 - Application for Writ of Continuing Garnishment. The court granted the government's motion and the government issued the writ on December 2, 2014. See Filing No. 83 - Order; Filing No. 85 - Writ. On December 3, 2014, Craig was served with the writ. See Filing No. 87.

On December 9, 2015, Craig filed an Answer of the Garnishee. See Filing No. 87 - Answer. Craig represented at all times material Rasmussen & Mitchell held a perfected Article 9 security interest in all of Wong's tangible and intangible assets securing Wong's obligation to the firm for an amount in excess of $200, 000. Id. (citing Filing No. 87 Ex. 1 - Financing Statement, Ex. 2 - Uniform Commercial Code Lien Search); see also TR. 9. Rasmussen & Mitchell and Craig agreed that of the $100, 000 payable to Craig, $50, 000 would immediately go to Rasmussen & Mitchell, with Rasmussen & Mitchell being deemed to have made a partial release or partial termination of its security interest in the remaining $50, 000. Id. at 5 (citing Filing No. 87 Exs. 4 and 5 - Subordination Emails); see also TR. 9. Craig would then receive $30, 000 of the remaining $50, 000 and the residual $20, 000 would be paid to Fr. Michael. Id. (citing Filing No. 87 Ex. 6 - Settlement Email). After accounting for Craig's $30, 000, Craig holds $20, 000 in funds for Fr. Michael, which Craig has not yet distributed due to the pending garnishment. Id. at 6; TR. 5-6. Rasmussen & Mitchell have not asserted any further claim to the $20, 000. See TR. 6, 10, 13, 15-16.

The court held a hearing on January 21, 2015. See Filing No. 92 - Text Minute Entry. During the hearing, Craig argued he is not waiving his balance of the $50, 000, that is, the remaining $20, 000. See TR. 11, 17. However, Craig admitted he "do[es] not have... an argument to give to the court that would defeat the claim of the government as to that residual amount except... that... Father Michael is the person who actually put [the agreement] together." Id. Craig argued at minimum the government would get the residual, but argued the more equitable action would be to give the residual to Fr. Michael. Id.

ANALYSIS

The Mandatory Victims Restitution Act (MVRA) requires restitution for certain crimes, "including any offense committed by fraud or deceit, " and authorizes the United States to enforce a restitution order in accordance with its civil enforcement powers. See 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii)); 3613(f), 3664(m)(1)(A). The procedure for enforcing a judgment, including restitution, is set forth in 18 U.S.C. § 3613. Specifically, "[n]otwithstanding any other Federal law, a judgment imposing a fine may be enforced against all property or rights to property of the person fined."[1] The MVRA specifically allows for recovery of settlement proceeds:

If a person obligated to provide restitution, or pay a fine, receives substantial resources from any source, including inheritance, settlement, or other judgment, during a period of incarceration, such person shall be required to apply the value of such resources to any restitution or fine still owed.

18 U.S.C. § 3664(n) (emphasis added). The United States may enforce restitution orders in the same manner as it enforces fines, or "by all other available and reasonable means." 18 U.S.C. § 3664(m)(1)(A)(i)-(ii). Furthermore, the United States may enforce a judgment imposing a fine or restitution "in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law." 18 U.S.C. § 3613(a) and (f).

The FDCPA, 28 U.S.C. §§ 3001-3308, is one of the means available to the government to enforce a restitution order. See 28 U.S.C. § 3001(a)(1). Under the FDCPA, one of the authorized enforcement procedures is a writ of garnishment. "A court may issue a writ of garnishment against property... in which the debtor has a substantial nonexempt interest and which is in the possession, custody, or control of a person other than the debtor, in order to satisfy the judgment against the debtor." 28 U.S.C. § 3205(a). Property subject to garnishment is defined as "any present or future interest, whether legal or equitable, in real, personal (including choses in action), or mixed property, tangible or intangible, vested or contingent, wherever located and however held (including community property and property held in trust (including spendthrift and pension trusts))[.]" 28 U.S.C. § 3002(12). After the government obtains a writ of garnishment, it must serve the writ both to the judgment debtor and to the garnishee. See 28 U.S.C. § 3205(c)(3).

The government has complied with all statutory requirements for garnishment and neither Wong nor Craig have alleged lack of compliance or that an exemption applies. Additionally, neither Wong nor Craig have alleged an exemption applies. The sole ...


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