Tuesday, February 09, 2021

Despite equitable concerns, property was not subject to criminal forfeiture where third party's interest in forfeited property was superior to defendant's interest

Defendant Lucas was convicted of wire fraud and related offenses for attempting to take control of Burke Farm. Lucas consented to forfeiture of Burke Farm because it was purchased with proceeds of his fraud. Diamond Developers, a third party company, interceded in the forfeiture proceedings, arguing that it held a superior interest in Burke Farm because Diamond Developers owned the farm prior to Lucas's crimes. Diamond Developers acquired Burke Farm in 2004. Lucas submitted a fraudulent loan application to acquire Diamond Developers in 2009. He fraudulently obtained a mortgage on the farm in February 2010. Lucas, his wife, and father-in-law acquired Diamond Developers one month later.  The District Court granted the forfeiture order over Diamond Developers' objection.

 In United States v. Lucas, __ F.3d __, 2021 WL 193073 (3d Cir. Jan. 20, 2021), the Third Circuit reversed the District Court's decision, finding that if third party's interest in forfeited property, at time of criminal acts, was superior to criminal defendant's interest—or if third party had interest and defendant did not—then third party's right outweighs interest that government acquires when it steps into defendant's shoes at time of offenses. While the Court recognized the government's concerns about the equities of the case, the plain language of the statute controlled. The Court also noted that the government could have sought criminal forfeiture of Lucas's interest in Diamond Developers and civil forfeiture of his wife and father-in-law's interests. Because the government did not follow the rules or the plain language of the forfeiture statute, it was not entitled to confiscate the property.

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