United States v. $7,599,358.09
953 F. Supp. 2d 549
D.N.J.2013Background
- Civil forfeiture action in rem against funds from Leading Edge accounts tied to Allen Hilly.
- Leading Edge held money diverted from Illinois AEG and ECI, two PEOs owned by Hilly.
- Two fraudulent schemes: misrepresenting workers’ compensation coverage and diverting trust fund/payroll taxes to Leading Edge accounts.
- Hilly’s transfers totaled over $15 million; UBS and Bank of America Leading Edge accounts seized after his 2006 arrest.
- Illinois Liquidator (Director of Insurance) obtained default judgments against Leading Edge; liquidates AEG/ECI assets and asserts claim to Defendant property.
- Court addressed standing, forfeitability under 18 U.S.C. § 981, and defenses (statute of limitations, McCarran-Ferguson, innocent owner).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge forfeiture | Liquidator has colorable ownership via Illinois order. | Government may strike Liquidator for lack of standing. | Liquidator has standing to contest forfeiture. |
| Forfeitability of Defendant property | Property traceable to wire fraud under § 1343; proceeds forfeitable. | Liquidator defenses defeat forfeiture or negate traceable link. | Property forfeitable; Government established traceability to fraud. |
| Statute of limitations | Discovery window allowed action within five years or two years after discovery of involvement; timely filed. | Action untimely as of discovery date. | Action timely; Liquidator’s statute defense rejected. |
| McCarran-Ferguson reverse preemption | Federal forfeiture interferes with Illinois insurance regulation; reverse preemption applicable. | State law impairs; preemption bars forfeiture. | No reverse preemption; McCarran-Ferguson does not bar action. |
| Innocent owner defense | Liquidator stands in AEG/ECI shoes; innocent owner defense may apply. | AEG/ECI knowingly participated in or failed to stop fraud; not innocent owners. | Liquidator failed to prove innocent owner status; defense denied. |
Key Cases Cited
- United States v. Lavin, 942 F.2d 177 (3d Cir.1991) (government relation-back on forfeiture at time of offense)
- United States v. $8,221,877.16 in U.S. Currency, 330 F.3d 141 (3d Cir.2003) (standing and procedural requirements in forfeiture)
- United States v. Contents of Accounts Nos. 3034504504 & 144-07143, 971 F.2d 974 (3d Cir.1992) (colorable ownership and standing concepts in forfeiture)
- One Lincoln Navigator 1998, 328 F.3d 1011 (8th Cir.2003) (colorable ownership/possession in forfeiture context)
- Suter v. Munich Reinsurance Co., 223 F.3d 150 (3d Cir.2000) (reverse preemption framework under McCarran-Ferguson)
- Humana Inc. v. Forsyth, 525 U.S. 299 (1999) (McCarran-Ferguson analysis; federal law not precluded when no impairment)
- Gruber v. Price Waterhouse, 911 F.2d 960 (3d Cir.1990) (statute of limitations as affirmative defense borne by defendant)