United States v. Bailey
2013 U.S. Dist. LEXIS 25361
W.D.N.C.2013Background
- Bailey ran a Ponzi scheme; IRA petitioners forwarded funds to Bailey for self-directed IRAs to buy real estate; purchases were completed and assets titled in petitioners’ or their LLCs’ names; government sought forfeiture under 18 U.S.C. §982 and 28 U.S.C. §2461; Bailey was not a qualified custodian and funds were commingled but petitioners’ purchases occurred as directed; court previously found a constructive trust for Sage Certificates and later scrutinized nexus for ancillary claims; court ultimately removes petitioners’ properties from the forfeiture order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of IRA petitioners to challenge forfeiture | Petitioners have legal interests via titles/IRAs | Government contends lack of standing | Petitioners have standing under §853(n)(2) and 21 U.S.C. §853(n) |
| Nexus between defendant’s offenses and properties | Nexus exists because proceeds or assets relate to fraud | No direct nexus shown tying each property to offenses | Government failed to prove nexus; properties must be removed from forfeiture |
| Superior legal interests under §853(n)(6)(A) | Petitioners held vested, superior title to assets | Bailey had no ownership, only custodial role | Petitioners have vested/superior interests in the assets |
| Bona fide purchaser for value under §853(n)(6)(B) | Purchasers acted in arms’-length transactions | Funds derived from fraud; purchaser status questionable | Petitioners qualify as bona fide purchasers for value |
| Remission procedure viability under §853(i) | Remission could distribute proceeds to victims | Remission is discretionary and would violate due process | Remission not applicable; proceed with ancillary proceeding |
Key Cases Cited
- United States v. Reckmeyer, 836 F.2d 200 (4th Cir.1987) (third parties may challenge validity of forfeiture order under §853(n))
- United States v. Oregon, 671 F.3d 484 (4th Cir.2012) (bond between state property interests and federal forfeiture)
- Libretti v. United States, 516 U.S. 29 (U.S. 1995) (nexus and procedural framework for criminal forfeiture)
- United States v. McHan, 345 F.3d 262 (4th Cir.2003) (role of §853(n) in adjudicating third-party interests)
- United States v. Cherry, 330 F.3d 658 (4th Cir.2003) (nexus standard in preliminary forfeiture)