Free Motion for Forfeiture of Property - District Court of Connecticut - Connecticut

Case 3:02-cv-00889-EBB

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Filed 10/18/2007

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT : : Plaintiff, : : v. : : 277 DIAMONDS VALUED AT : APPROXIMATELY $2,461,093.00, : : ONE (1) PAIR OF DIAMOND EARRINGS,: VALUED AT APPROXIMATELY : $50,120.00, : : AND : : ONE (1) PLATINUM AND DIAMOND : RING VALUED AT APPROXIMATELY : $25,935.00, : : Defendants. : UNITED STATES OF AMERICA,

Civil No. 3:02CV00889 (EBB)

October 18, 2007

MEMORANDUM IN SUPPORT OF MOTION FOR DECREE OF FORFEITURE The Plaintiff, United States of America, hereby submits this memorandum in support of its Motion for Decree of Forfeiture, which motion has been filed pursuant to Rule 55 of the Federal Rules of Civil Procedure, and Rule G(5) of the Supplemental Rules for Admiralty or Maritime and Asset Forfeiture Claims. On May 22, 2002, a Verified Complaint of Forfeiture was filed on behalf of the plaintiff, United States of America, for the forfeiture of 277 diamonds valued at approximately $2,461,093.00, one (1) pair of diamond earrings valued at approximately $50,120.00, and one (1) platinum and diamond ring valued at approximately $25,935.00 ("Defendant Diamonds and Diamond Jewelry"). The Complaint alleges that the Defendant Diamonds and Diamond Jewelry

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were involved in a financial transaction in violation of 18 U.S.C. §§ 1956 and 1957, and are therefore subject to forfeiture to the United States pursuant to 18 U.S.C. § 981(a)(1)(A), or constitute or are derived from proceeds traceable to an offense constituting "specified unlawful activity" (as defined in 18 U.S.C. § 1956(c)(7)), namely mail fraud and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343, or conspiracy to commit such offenses, and are therefore subject to forfeiture to the United States pursuant to 18 U.S.C. § 981(a)(1)(C). All known potential claimants believed to have an interest in the Defendant Diamonds and Diamond Jewelry have been notified of this action. The Plaintiff, United States of America, has resolved the claims of the various claimants by agreement. The full procedural history is set forth in the proposed Decree of Forfeiture submitted herewith. The claims of the seven (7) victim insurance companies,1 which were defrauded by Martin Frankel, were recently resolved by Stipulations with the competing claims of the three (3) re-insurance companies,2 and the United States of America. Pursuant to a Stipulation with the three (3) re-insurance companies, the re-insurance companies agreed to stipulate to their dismissal from the action and withdraw their claims to the Defendant Diamonds and Diamond Jewelry. In a separate Stipulation, the Receiver-Claimants agreed to the forfeiture of the Defendant Diamonds and Diamond Jewelry, and the United States agreed to distribute to the

The seven (7) insurance companies and their respective pro rata shares are as follows: (1) Franklin Protective Life Insurance Company (4.10%), (2) Family Guaranty Life Insurance Company (6.99%), (3) Farmers and Ranchers Life Insurance Company (2.30%), (4) First National Life Insurance Company of America (54.78%), (5) Franklin American Life Insurance Company (8.00%), (6) Old Southwest Life Insurance Company (1.75%), and (7) International Financial Services Life Insurance Company (22.08%). The three (3) re-insurance companies are: (1) Peoples Benefit Life Insurance Company, (2) Veterans Life Insurance Company, (3) Huff Cook, Inc./Settlers Life Insurance Company. 2
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Case 3:02-cv-00889-EBB

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Receiver-Claimants the net proceeds of the interlocutory sale of the diamonds and diamond jewelry, less costs, pursuant to the agreed upon pro rata distribution as set forth in the Stipulation between the Receiver-Claimants and the United States. The Defendant Diamonds and Diamond Jewelry were sold a public auction by the Internal Revenue Service Criminal Investigation pursuant to an Order for Interlocutory Sale, dated September 15, 2004. The proceeds from the interlocutory sale were deposited into the Treasury Department's Seized Asset Suspense Account, which is an interest bearing account where the funds have accrued and continue to accrue interest. In the Stipulation between the United States and the Receiver-Claimants, the parties have stipulated that the Receiver-Claimants shall file a separate motion to the Court requesting the payment of accrued interest on the assets seized and held by the Internal Revenue Service Criminal Investigation on the same pro rata basis set forth in the Stipulation. This Stipulation is based upon the Petition for Remission or Mitigation of Forfeiture filed by the Receiver-Claimants, and which was granted by the Department of Justice pursuant to its regulations. See Regulations Governing the Remission or Mitigation of Civil and Criminal Forfeiture, 28 C.F.R. §§ 9.1-9.9. The Petition for Remission or Mitigation of Civil and Criminal Forfeiture procedures authorize the United States Attorney General to transfer or restore forfeited property to victims of fraud once the property is ordered forfeited to the United States. Here, the
Attorney General has authorized the transfer of these assets to the victim Receiver-Claimants upon entry of decree of forfeiture.

The Receiver-Claimants concur with the relief sought by this motion and are in agreement with the language of the proposed Decree of Forfeiture. In that all the claims filed in 3

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this case have been resolved, except the issue of distribution of interest accrued on assets seized by the Internal Revenue Service Criminal Investigation, the United States respectfully requests
that its Motion for Decree of Forfeiture be granted so that the net proceeds from the interlocutory sale of the Defendant Diamonds and Diamond Jewelry may be returned to the victims pursuant to the granted Petition for Remission. A proposed Decree of Forfeiture is submitted herewith.

Respectfully submitted, PLAINTIFF, UNITED STATES OF AMERICA KEVIN J. O'CONNOR UNITED STATES ATTORNEY

JULIE G. TURBERT ASSISTANT U.S. ATTORNEY ATTORNEY BAR # ct23398 157 CHURCH STREET NEW HAVEN, CT 06510 TEL. (203) 821-3700 FAX (203) 773-5373 Email: [email protected]

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CERTIFICATE OF SERVICE This is to certify that a copy of the within and foregoing Memorandum in Support of Motion for Decree of Forfeiture has been mailed, postage prepaid, this 18th day of October, 2007, to: Douglas J. Schmidt, Esq. Terrance Summers, Esq. Blackwell Sanders Peper Martin, LLP 4801 Main Street, Suite 1000 Kansas City, MO 64112 Douglas S. Skalka, Esq. Neubert, Pepe & Monteith 195 Church Street New Haven, CT 06510 Graham Matherne, Esq. Wyatt Tarrant & Combs 2525 West End Avenue, Suite 1500 Nashville, Tennessee 37203 Charles G. Copeland, Esq. Copeland, Cook, Taylor & Bush, P.A. 1062 Highland Colony Parkway P.O. Box 6020 Ridgeland, Mississippi 39157 Andrew B. Campbell Wyatt, Tarrant & Combs 2525 West End Avenue, Suite 1500 Nashville, TN 37203 Susan Loving, Esq. Lester, Loving and Davies 1701 South Kelly Edmund, Oklahoma 73013 Steve A. Uhrynowycz, Esq. Arkansas Insurance Department 1200 W. Third Street Room 340 Little Rock, AR 72201-0104 James A. Lenes, Esq. 9 Grove Street Ridgefield, CT 06877 Forrest B. Lammiman, Esq. Brian I. Hays, Esq. Randall Allan Hack, Esq. Lord Bissell & Brook 115 South Lasalle Street Suites 2600-3600 Chicago, IL 60603 David N. Rosen, Esq. 400 Orange Street New Haven, CT 06511

____________________________ JULIE G. TURBERT ASSISTANT U.S. ATTORNEY

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