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United States v. Sabatino

United States District Court, S.D. Florida, Miami Division

April 13, 2018

UNITED STATES OF AMERICA
v.
JAMES SABATINO, et al. Defendants. IN RE: CROWN PAWN LLC, Third-Party Petitioner.

          REPORT AND RECOMMENDATIONS CONCERNING CROWN PAWN LLC'S PETITION TO SET ASIDE FORFEITURE

          JONATHAN GOODMAN UNITED STATES MAGISTRATE JUDGE.

         I. Introduction

         Following a criminal trial and the forfeiture of several hundred thousand dollars of fraudulently obtained assets (primarily jewelry, watches, and purses) that Crown Pawn LLC purchased from the criminal defendants, Crown filed a petition to determine its interest in the assets and requested an ancillary hearing. [ECF Nos. 133; 152');">152');">152');">152');">152');">152');">152');">152]. United States District Judge Joan A. Lenard referred the petition to the Undersigned. [ECF No. 240]. The parties fully briefed the matter, and on January 16, 2018, I held an evidentiary hearing on Crown's petition. [ECF Nos. 152');">152');">152');">152');">152');">152');">152');">152; 172; 325].

         Crown raises two statutory theories to support its claim. First, Crown argues that it was an innocent, bona fide purchaser for value of the items. It contends that it was the victim of a crime because the defendants' criminal scheme involved duping Crown into purchasing the expensive goods that the defendants had fraudulently obtained.

         Second, Crown argues that it has a superior interest in the forfeited property. In support, Crown again characterizes itself as a victim of the defendants' crimes. Crown then argues that it already had a vested interest in the goods before a crime occurred because the crime of fraud was not consummated until Crown was itself duped into purchasing the stolen items.

         Both theories generate one overarching issue: can a pawnshop that was not criminally charged portray itself as a victim of a criminal scheme to fraudulently obtain luxury items and thus prevent the United States from forfeiting its interest in those items? Under the specific circumstances of the relevant factual scenario developed in this case, the answer is “no.”

         At bottom, Crown has not met its burden of establishing either of the two theories upon which it relies. That is because if Crown's view of being a victim is correct, then its self-described status is based, at least in part, on its own conduct. To a significant degree, Crown is responsible for its own predicament because it did not conduct sufficient due diligence when confronted with myriad flags warning of suspicious and atypical activity underlying the defendants' offer to sell it the forfeited items.

         Therefore, for the reasons outlined below, the Undersigned respectfully recommends that Judge Lenard deny Crown's petition.

         II. Procedural and Factual Background

         Posing as a recording-music company employee, Defendant James Sabatino conned designer clothing, handbag, and jewelry businesses into loaning him luxury goods, on the false premise that the items would be featured in music videos and photo shoots and then returned. But instead of returning the items, Sabatino conspired with others, including Defendants Denise Siksha Lewis and Valerie Kay Hunt, to steal the merchandise and then sell some of it to pawnshops in Fort Lauderdale and Deerfield Beach, Florida.

         A federal grand jury indicted Sabatino, Hunt, and Lewis, among others, on various mail and wire fraud charges stemming from the scheme. [ECF No. 3]. The Indictment also included forfeiture allegations, which alleged that upon conviction of any of the charged violations, the defendants must each forfeit to the United States any property, real or personal, which constitutes or is derived from proceeds traceable to such violation, under 18 U.S.C. § 981(a)(1)(C). [ECF No. 3, pp. 11-12].

         The Indictment alleged that the property subject to forfeiture included, among other things, the following luxury goods:

i. Three (3) Judith Leiber Couture clutch bags, seized on or about August 12, 2015;
ii. Two (2) Audemars Piguet watches, seized on or about August 12, 2015;
iii. Eleven (11) Tiffany & Co. bracelets and watches, seized on or about August 12, 2015;
iv. Thirteen (13) Jimmy Choo handbags and shoes, seized on or about August 12, 2015;
v. Three (3) Alexander Wang tote bags, seized on or about August 12, 2015;
vi. One (1) Judith Leiber Couture clutch bag, seized on or about August 19, 2015; and
vii. Ten (10) Jimmy Choo handbags and shoes, seized on or about August 19, 2015.

[ECF No. 3, 12');">p. 12].[1" name="FN1" id= "FN1">1]

         Lewis and Hunt entered into written plea agreements, and both pled guilty to Count 1 of the Indictment, which charged conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 1349. [ECF Nos. 98; 100; 162-63]. As a result, the Court entered preliminary orders of forfeiture against Lewis and Hunt, which forfeited, subject to third-party interests, their right, title, and interest in the goods listed above. [ECF Nos. 133; 186].

         After receiving notice, [2] Crown filed its petition to set aside the forfeitures, claiming that it was a bona fide purchaser of the forfeited property. [ECF No. 152');">152');">152');">152');">152');">152');">152');">152, p. 4');">p. 4');">p. 4');">p. 4]. Crown alleged that it “purchased [the forfeited items] from [Hunt and Lewis] as a bona fide purchaser for value without knowledge that said individuals were not owners rightfully in possession of the items of personal property or obtained [sic] by the same fraud.” [ECF No. 152');">152');">152');">152');">152');">152');">152');">152, p. 4');">p. 4');">p. 4');">p. 4]. Crown also alleged that it “had no reason to be concerned or suspicious that the items of personal property where obtained by the Defendants through fraud or collusion[.]” [ECF No. 152');">152');">152');">152');">152');">152');">152');">152, 5');">p. 5');">5');">p. 5]. Crown similarly alleged that it “had no reason to suspect that the transactions were anything but legitimate to exercise reasonable and due care to protect itself from fraud[.]” [ECF No. 152');">152');">152');">152');">152');">152');">152');">152, p. 6');">p. 6]. Moreover, Crown described itself as “an innocent victim of a fraudulent scheme specifically targeted by the Defendants to be victimized[.]” [ECF No. 152');">152');">152');">152');">152');">152');">152');">152, 5');">p. 5');">5');">p. 5 (emphasis added)].

         Later, in a bench memorandum, Crown also claimed that, apart from its bona-fide-purchaser status, it had a superior interest in the forfeited assets. [ECF No. 313, pp. 4');">p. 4');">p. 4');">p. 4-5]. Crown argued that the crime of fraud “could not have been consummated nor could have attached to the property . . . at any time frame until after [Crown] paid [the defendants] money or cash for the personal property sought to be forfeited[.]” [ECF No. 313, p. 4');">p. 4');">p. 4');">p. 4]. Crown claims that “[t]he criminal act of fraud did not occur nor was the crime completed or consummated until [Crown] came in possession of the luxury items and paid the Defendants for the goods.” [ECF No. 313, pp. 4');">p. 4');">p. 4');">p. 4-5]. As a result, Crown concludes, its “interest in the luxury goods at the time of the commission of the acts which gave rise to the fraud were vested in [Crown] rather than after the commission of the crime, ” making it “clearly superior to any right that the Defendants had in the property under the law of the State of Florida.” [ECF No. 313, 5');">p. 5');">5');">p. 5].

         The Undersigned held an evidentiary hearing on Crown's claims on January 16, 2018.[3" name="FN3" id= "FN3">3] Aside from Crown, no other third-party claimants have filed a judicial claim to the forfeited items at issue, and the time for filing a claim has expired.[4]

         III. Legal Standard

         Twenty -one U.S.C. § 853(n)(6) sets forth the burden of proof and statutory grounds third-party petitioners must meet to claim forfeited property:

         If, after the hearing, the court determines that the petitioner has established by a preponderance of the evidence that--

(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section;
the court shall amend the order of forfeiture in accordance with its determination.

§ 853(n)(6).

         In determining whether a petitioner has met its burden, the district court must consider relevant portions of the criminal record, including sentencing, and additional evidence presented at a hearing. § 853(n)(5); United States v. Cohen, 3 Fed.Appx. 531');">243 Fed.Appx. 531, 533-34 (11th Cir. 2007) (upholding district court's reliance on facts established in criminal case when considering third-party claim to forfeited assets).

         In general, ancillary proceedings are not a forum in which third parties can re-litigate issues that were already determined in the criminal case, such as that property was subject to forfeiture. See United States v. Davenport, 668 F.3d 1316, 1321 (11th Cir. 2012) (holding that third-party claimants “may not relitigate the merits of a forfeitability determination”); see also United States v. Fabian, 3d 636');">764 F.3d 636, 638 (6th Cir. 2014) (“like every circuit to have reached the issue, we hold that third parties lack statutory standing to challenge a district court's determination . . . that certain property is subject to forfeiture.”).

         IV. Analysis

         A. Superior Interest Under § 853(n)(6)(A)

         Because it failed to assert its superior-interest claim in its petition, Crown arguably lacks statutory standing to advance that theory of claim. See United States v. Soreide, 1 F.3d 1351');">461 F.3d 1351, 1355 (11th Cir. 2006) (holding that superior-interest claim not asserted in petitions was now “belated” and “not asserted as required by the statute”); accord United States v. White, 5 F.3d 1073');">675 F.3d 1073, 1079 (8th Cir. 2012) (“Courts typically look askance at belated attempts to add new or additional grounds for relief to third-party petitions.”). ...


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