United States v. Huntington National Bank
2012 U.S. App. LEXIS 12040
6th Cir.2012Background
- Cyberco engaged in a multi-million-dollar fraud against lenders; Huntington extended credit and took a broad security interest including deposit accounts in Cyberco’s assets.
- In 2004 the government seized about $4 million of Cyberco assets, including $705,168.60 from Huntington’s Cyberco Account.
- A preliminary forfeiture order was entered in 2007, with notice published under 21 U.S.C. § 853(n)(1).
- Huntington filed a verified petition claiming a direct ownership interest in the Cyberco Account funds, asserting it was owed by Cyberco and entitled to funds under its security agreement.
- Huntington argued it qualified as a bona fide purchaser for value (BFP) under § 853(n)(6)(B); the district court held Huntington not a BFP as a matter of law and forfeiture remained.
- On remand, the district court again denied Huntington’s BFP claim, leading to this appeal seeking reversal and relief under § 853(n)(6)(B).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a secured creditor can be a BFP under § 853(n)(6)(B). | Huntington argues security interest qualifies as BFP despite being unsecured until after default. | United States contends BFP excludes creditors; only traditional buyers gain protection. | Yes; secured creditors can be BFP under § 853(n)(6)(B). |
| Whether Huntington’s security interest extended to the funds in the Cyberco Account. | Security agreement covered all property, including accounts and funds. | Government argues distinction between interest in property and funds within an account. | Security interest extended to the funds in the Cyberco Account. |
| Whether the government’s stipulation that Huntington was an innocent purchaser bars further inquiry. | Government stipulated Huntington was unaware of fraud, supporting BFP status. | Stipulation should be binding only if deliberate and clear; remand was possible. | Government’s prior stipulation supports Huntington’s BFP status; remand unnecessary. |
Key Cases Cited
- United States v. Harris, 246 F.3d 566 (6th Cir. 2001) (relation-back and BFP framework; BFP protects innocent purchasers)
- Campos, 859 F.2d 1233 (6th Cir. 1988) (BFP should be liberally construed; secured interests may fit)
- Lavin, 942 F.2d 177 (3d Cir. 1991) (hornbook BFP concept; relation-back limitations)
- Reckmeyer, 836 F.2d 200 (4th Cir. 1987) (security interests as potential BFP under § 853(n)(6)(B))
- BCCI Holdings (Luxembourg), S.A., 961 F. Supp. 287 (D.D.C. 1997) (right of setoff vs. purchase; distinction crucial to BFP)
- Timley, 507 F.3d 1125 (8th Cir. 2007) (federal-law determination after state-law property right analysis)