Divorce Order May Prevent Taking of Property to Satisfy Criminal Restitution Order – U.S. v. Duran

December 5, 2012 by David S. Seltzer

Restitution orders are a very common part of sentencing for crimes involving theft, including fraud crimes as well as outright theft and embezzlement. However, as with asset forfeiture laws for drug and child pornography defendants, any third party who also has an interest in the asset has a right to challenge the taking in court. In United States v. Duran, the Eleventh U.S. Circuit Court of Appeals ruled that the ex-wife of a defendant may bring a challenge to the federal government’s attempt to take the marital home as restitution. Lawrence Duran was convicted of conspiracy to commit Medicare fraud, and was ordered to pay more than $85 million in restitution. A South Florida district court denied ex-wife Carmen Duran’s motion opposing the government’s attempt to take their apartment, granted to her in the divorce. The Eleventh Circuit reversed this, finding the taking was barred by the Fair Debt Collection Practices Act.

Carmen and Lawrence divorced in June of 2010. As part of the divorce settlement, Lawrence agreed to transfer his interest in a New York City apartment to Carmen. In May of 2011, Lawrence pleaded guilty to 38 crimes related to Medicare fraud and received a sentence of 50 years in prison and $87.5 million in restitution. Five months later, the federal government requested a writ of execution against the apartment to collect its restitution from Lawrence’s interest in the property. Carmen was not served. The next month, however, Carmen moved to stay or dissolve the writ, citing multiple documents showing she had been granted Lawrence’s interest in the apartment during their divorce. The U.S. argued that its lien had priority and Carmen could still collect half of the sale proceeds. The district court denied Carmen’s motion without prejudice, saying it had no jurisdiction to make findings about the divorce and property dispute.

On appeal, Carmen argued that the district court does have the authority under the Fair Debt Collection Practices Act to determine ownership of assets under state law. The Eleventh Circuit analyzed the issue and eventually agreed. The FDCPA is best known as a consumer protection law, but it’s also the law that permits the federal government to satisfy criminal-court financial judgments through civil court. It permits the federal government to levy co-owned property only to the extent permitted by state law in the state where the property is located. It permits courts to deny or limit the government’s remedies at its discretion; it also requires courts to adjudicate ownership disputes because the government may only levy property in which the debtor has a “substantial nonexempt interest.” Thus, the Eleventh said, the district court had a duty to determine whether Lawrence had such an interest. It ordered the district court to, on remand, determine that question as well as ownership of the apartment.

It’s pleasing to see that an apparently innocent ex-spouse has the right to fight taking of her property by the government, for a debt that she is not alleged to have helped create. In general, courts are not always kind to co-owners of assets when it’s time for an asset forfeiture or restitution proceeding. Sometimes, there’s a perception that the claimant is not entirely innocent of the underlying crime. In my opinion as a criminal defense attorney, this is unfair; if the spouse or co-owner is guilty, the government should be able to prove it in a court of law. If not, it’s inappropriate to penalize him or her by taking away property without due process. Everyone should be presumed innocent until proven guilty—especially people who are accused of no crime.

If you’re facing serious criminal charges in Florida, don’t wait to call Seltzer Law, P.A., for a free, confidential consultation on your legal options. We answer calls 24 hours a day and seven days a week, because we know arrests don’t just happen during business hours. You can reach us anytime at 1-888-THE-DEFENSE (1-888-843-3333) or send us a message online.

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