Can the Government Seize Property After Fraud?

In any criminal trial, a defendant faces the possibility of a prison term or a fine if convicted. But in cases involving property crimes such as fraud, the defendant may also be ordered to pay restitution to their victims. Federal law actually mandates restitution for many types of white collar crimes. And when a judge does order restitution, the U.S. Attorney’s Office may file a lien against the defendant’s property and take additional action to enforce the judgment.

Prosecutors Pursue Deceased Bankruptcy Fraud Defendant’s Property 20 Years Later

In some cases this collection activity may continue years–or even decades–after the defendant’s original trial. Consider the case of United States v. Cluck, which involves the federal government’s efforts to collect restitution from a now-deceased defendant who was originally convicted at a jury trial held in 1997. And the events underlying the case go back all the way to March 1990.

It was at that time the defendant filed for Chapter 7 bankruptcy. After a bankruptcy court gave the defendant a discharge–an order releasing him from any further obligation to pay his debts–the court-appointed trustee assigned to the case discovered the defendant had “failed to disclose and fraudulently transferred property and assets,” according to court records, to keep them out of his bankruptcy estate. The bankruptcy court agreed the defendant illegally concealed assets, made false statements in connection with his case, and “transferred property with the intent to defraud, hinder, or delay creditors.”

Subsequently, federal prosecutors charged the defendant with criminal bankruptcy fraud. Following his conviction, a judge ordered the defendant to pay $185,000 in restitution. The government then filed a lien against all of the defendant’s property in Texas. But the government made no move to foreclose on its lien until January 2018, some 20 years after the defendant’s sentencing and nearly a year after he died.

This led to additional litigation between the government and the defendant’s ex-wife. The ex-wife claims some of the property the government wants to seize is her “separate property” under the terms her divorce judgment. She moved to dismiss the government’s foreclosure petition, alleging among other things the government did not file its petition until after a 20-year statute of limitations expired.

In a September 18, 2018, report, a federal magistrate judge recommended the court deny the ex-wife’s motion to dismiss at this time. With respect to the statute of limitations, the magistrate said under current law, the 20-year clock did not start to run until the defendant was released from prison, which occurred in May 1999. As for the wife’s “separate property” claims, the magistrate noted Texas is a community property state. The couple did not divorce until after the defendant’s conviction, and under federal law, a judgment lien attaches to community property under certain circumstances.

Speak with a Houston White Collar Crimes Lawyer Today

As you can see, the federal government takes restitution for white-collar crimes quite seriously. This is why it is imperative to work with an experienced Houston criminal defense attorney if you are charged with any kind of fraud. Contact the Law Offices of Tad Nelson & Associates in Galveston, Houston, or League City today at (281) 280-0100 if you require immediate legal assistance.