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United States v. Menaged

United States District Court, D. Arizona

April 12, 2018

United States of America, Plaintiff,
v.
Yomtov Scott Menaged, Defendant, Joseph Menaged, Claimant.

          HONORABLE MURRAY M. SNOW, UNITED STATES DISTRICT JUDGE

          REPORT AND RECOMMENDATION

          HONORABLE MICHELLE H. BURNS UNITED STATES MAGISTRATE JUDGE

         On February 2, 2018, Claimant Joseph Menaged filed a Verified Petition for Hearing on Preliminary Order of Forfeiture and Claim of Exemption from Forfeiture (“Petition”), in which he claims to be the owner of $709, 405.40 seized from a bank account held in the name of Joseph Menaged. (Doc. 212.) On February 8, 2018, the presiding Judge Murray M. Snow referred the Verified Petition to Magistrate Judge Michelle H. Burns for review and ruling. (Doc. 215.) On February 16, 2018, the Government filed a Motion to Dismiss Petition Contesting Forfeiture, asserting that Claimant's Petition should be dismissed because it is time-barred, and fails to state a claim (Doc. 222). Claimant has filed a Response, (Doc. 224), and the Government has filed a Reply (Doc. 228).

         BACKGROUND

         In 2017, Defendant was indicted on 24 counts of wire fraud, aggravated identity theft, and conspiracy to defraud. (Doc. 3.) A forfeiture allegation, pursuant to 18 U.S.C. § 981 and 21 U.S.C. §§853, 881, and 28 U.S.C. § 246(c), was also included in the Indictment. (Id.) Defendant pled guilty to Count 1, Conspiracy to Commit Bank Fraud, Count 10, Aggravated Identify Theft, and an Information charging Defendant with Money Laundering Conspiracy. (Docs. 134, 135.) In his plea agreement, Defendant also agreed to certain forfeiture provisions. (Doc. 135 at 7-8.)

         On October 23, 2017, the Government filed a Motion for a Preliminary Order of Forfeiture, moving to forfeit the $709, 405, 40 (the “seized funds”) at issue here. (Doc. 142.) On November 27, 2017, the Court entered a Preliminary Order of Forfeiture, determining that all of seized funds are proceeds traceable to Defendant's criminal conduct, and therefore subject to forfeiture. (Doc. 173.) In its Order, the Court made the following findings:

1. Defendant defrauded DenSco Investment Corporation out of tens of millions of dollars. Defendant, through Arizona Home Foreclosures, transferred $709, 405.40 of those fraud proceeds to petitioner's bank account; and
2. The $709, 405.40 that the government seized from petitioner's bank account are proceeds traceable to defendant's criminal conduct, they are property involved in defendant's money laundering offenses, and they are proceeds obtained directly or indirectly as result of defendant's bank fraud; and
3. The $709, 405.40 seized from Account #0927 is subject to forfeiture pursuant to 18 U.S.C. §§ 981(a)(1)(A) and (C), 982(a)(1)(A) and 982(a)(2), and 28 U.S.C. § 2461.

(Doc. 173.)

         The Government served Claimant with notice of the forfeiture and the preliminary order of forfeiture on December 28, 2017, via certified and first class mail. (Doc. 222, Exh. 2.) The notice was received on January 2, 2018, as evidenced by a signed certified mail receipt at Claimant's address in Miami Beach, Florida. (Id.) On February 2, 2018, Claimant filed his Petition, in which he asserts that in December 2011, he lent Defendant (his son) $5, 500, 000.00, and that because the seized funds are repayment on the loan, they should be exempt from forfeiture. (Doc. 212.) He claims that he is an “innocent third-party, ” and has a “valid security interest in the property.” (Id. at 2.) Claimant also asserts that he had “no involvement in or knowledge of Defendant's criminal activity, ” and that the money was loaned to Defendant prior to his criminal conduct. (Id.)

         The Government moves, pursuant to Fed. R. Crim. P. 32.2(c)(1)(A), to dismiss Claimant's petition, asserting that (1) it is time barred, and (2) fails to state a claim as the Government's interest in the seized funds has priority as a matter of law. (Doc. 222.)

         STANDARD ON MOTION TO DISMISS

         Rule 32.2(c), Fed. R. Crim. P., authorizes dismissal of a third-party claim for failure to state a claim. In analyzing a motion to dismiss in a criminal forfeiture proceeding, the court applies the same standard it would in reviewing a motion to dismiss a complaint pursuant to Rule 12(b) of the Federal Rules of Civil Procedure. See United States v. Catala, 870 F.3d 6, 8 (1st Cir. 2017). As such, “a third-party petitioner under section 852(n) must plead ‘enough facts to ...


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