United States v. Wilson
2011 U.S. App. LEXIS 21839
| 9th Cir. | 2011Background
- Wilson ran a Ponzi scheme that defrauded Gray of roughly $2.3 million via a subscription investment.
- Gray wired funds to Wilson, which Wilson transferred to an Ameritrade account controlled by Wilson.
- The Ameritrade balance before transfers was reportedly $324.43; after transfers it grew to $1,490,418.57.
- Wilson retained $425,000 transferred from the Ameritrade account to an account in the name of Johnson, a co-victim.
- Gray contends the $425,000 traces to his investment; overall, Gray seeks a greater claim to forfeited funds.
- Pursuant to Wilson’s plea, the district court issued a preliminary forfeiture order, including funds in Ameritrade and Johnson’s account; Gray petitioned under 21 U.S.C. § 853(n).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gray has prudential standing under § 853(n)(2). | Gray asserts zone of interests does not apply; Bennett permits broad standing. | Government argues lack of prudential standing; cites district court's reasoning. | Gray has prudential standing; zone-of-interests test does not apply. |
| Whether the Government's interest is superior to Gray's under § 853(n)(6). | Gray's interest is greater than Wilson's; constructive trust arises to Gray’s benefit. | Government contends its interest prevails until Gray proves superiority. | Government's superior interest was incorrect; Gray's interest can be greater than defendant’s. |
| Whether Boylan governs the constructive trust at issue and would foreclose Gray's claim. | Boylan supports automatic constructive trust; Gray should prevail. | Government seeks to overturn Boylan; contends California law does not support automatic trust. | Panel declines to overturn Boylan; remand needed for equitable administration. |
| Whether the case should be remanded for evidentiary proceedings under § 853(n). | Facts such as traceability must be proven; an evidentiary hearing is required. | District court dismissed petition; no hearing held; standard requires fact-finding on remand. | Remand for proper evidentiary development consistent with § 853(n). |
| Whether equity requires suspending tracing rules to avoid preferring one victim over others. | Tracing should favor Gray as the original owner who was victimized. | Tracing rules avoid unduePreferential treatment; equality among victims is essential. | Equity may suspend strict tracing where warranted; avoid overbearing one victim at others’ expense. |
Key Cases Cited
- Boylan v. United States, 392 F.3d 1004 (9th Cir. 2004) (constructive trust arises by operation of law upon fraud; standing via trust)
- United States v. Hooper, 229 F.3d 818 (9th Cir. 2000) (applies § 853(n)(6) to pre-crime interests and bona fide purchasers)
- United States v. Ramunno, 599 F.3d 1269 (11th Cir. 2010) (compare state-law treatment of constructive trusts; different outcome)
- Cunningham v. Brown, 265 U.S. 1 (S. Ct. 1924) (equality favors general creditors when tracing would harm others)
- Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, 454 U.S. 464 (U.S. 1982) (prudential standing limits exist beyond constitutional requirements)
- Bennett v. Spear, 520 U.S. 154 (U.S. 1997) (zone-of-interests limitations may be negated by express statutory openness)
- Davies v. Krasna, 14 Cal.3d 502 (Cal. 1975) (California law on constructive trusts; requires judicial action to create)