Free Response to Motion - District Court of Colorado - Colorado

Case 1:03-cv-01041-PSF-BNB

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Filed 10/25/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT COURT OF COLORADO __________________________________ UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) DAVID B. ST. GERMAIN and ) RANDY OVERLEY, ) ) Defendants. ) __________________________________ )

Civil Action No. 03-cv-1041-PSF-BNB

UNITED STATES' OPPOSITION TO DEFENDANT OVERLEY'S AMENDED MOTION TO ALTER OR AMEND THE JUDGMENT The United States of America, through its attorney, John W. Suthers, United States Attorney for the District of Colorado, respectfully requests that the Court deny Randy Overley ("Overley") the relief he requests and, in the alternative, amend the judgment so that the crime victim can be made whole. In support, the United States says: 1. The Court found that Overley was an active participant in a sophisticated conspiracy to conceal St. Germain's assets to defraud the crime victim. Court Transcript p. 61:16-21. ("[I]t is apparent that Overley knew that St. Germain was . . . [constructing the Franktown property] with the purpose of concealing his assets from the U.S. Probation Office with the purpose of avoiding his restitution obligation and, nonetheless, provided assistance with the hope of benefit in helping St. Germain."). Significantly, the Court expressly found Overley conspired with St. Germain to enrich himself. Based on these findings, it offends the principles of justice and equity for the court to now credit Overley the money he invested in furtherance of this criminal 1

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scheme. The Court's judgment places Overley back in the position he would have been in if he had never entered into the conspiracy to defraud the crime victim. Such a holding is contrary to public policy. Now, Overley invites the court to walk further down that path. 2. While the Court found Overley's testimony lacked credibility, he pursues his Amended Motion to Alter or Amend the Judgment as if the opposite were true. The evidence at trial established that Overley will lie to further his self-interest. Overley admitted he consistently lied to St. Germain's probation officers; the Court also found his testimony regarding his March 31, 1997 employment letter incredible. Moreover, the United States revealed that Overley perjured himself in the state court proceeding where he testified that he did not have a business relationship with St. Germain. 3. Contrary to the District Court's analysis in its oral judgment, the government did not seek to impose a fine or civil liability on Overley based upon St. Germain's restitution order. Liability for the restitution has been placed solely on St. Germain. While the Court's constructive trust makes Overley an involuntary trustee, such a designation does not shift liability to him. He merely holds the property in a trust for the victim. It's well settled that a trustee cannot be reimbursed for the unilateral and unauthorized cost of improvement to the trust property ­ especially those improvements meant only to increase the wrongdoer's personal enjoyment of that property. Law of Trusts § 188.2 (4th Edition 2001); Warren v. Pazolt, 89 N.E. 381 (Mass. 1909) (it was improper for the trustee of an estate worth $920,000 to expend more than $850,000 in the erection of an office building). 4. While "[f]ederal district courts unquestionably possess broad discretion in fashioning equitable remedies[,]" Franks v. Bowman Transportation, Co., 424 U.S. 747, 764 (1975), it is 2

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uniformly recognized that the inherent equitable powers of the district courts are intended to guarantee "complete rather than truncated justice." Camp v. Boyd, 229 U.S. 530, 551 (1913). Equitable remedies are designed to make the victim whole; they are not a shield behind which a wrongdoer can hide. 5. The Court chose to impose a constructive trust upon the Franktown property. When a constructive trust is imposed, the principles of equity demand that a wrongdoer must not be reimbursed for any increase in value or improvements made to the illegally acquired property. See Restatement (First) of Restitution § 202 cmt c. (1937). Holding otherwise rewards the wrongdoer by allowing him to enjoy the ill-gotten fruits of his illegal activity and creates an incentive to wrongdoing by allowing the wrongdoer to be reimbursed for his involvement in the illegal activity. Id. ("If . . . the wrongdoer were permitted to keep the profit, there would be an incentive to wrongdoing, which is removed if he is compelled to surrender the profit. The rule which compels the wrongdoer to bear any losses and to surrender any profits operates as a deterrent upon the wrongful disposition of the property of others."). It is contrary to public policy to allow a wrongdoer to obtain reimbursement for expenses and retain a profit from his fraudulent activity before the victim is made whole. Thus, any such profit should go to the party entitled to the property by the imposition of a constructive trust. Id. ( "[T]he profit thus made by the wrongdoer cannot be retained by him; the person whose property was used in making the profit is entitled to it . . . [S]ince the profit is made from his property, it is just that he should have the profit rather than that the wrongdoer should keep it."). The Court seems to suggest that Overley's debt for the bank loan somehow allows him to shield a portion of the home's equity from being recovered for the victim. This ignores the fact that Overley obtained that loan to

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finance and profit from the criminal conspiracy. 6. The District Court relied on Lyndonville Savings Bank & Trust Co. as a reason for not allowing the crime victim to reach the full equity in the Franktown property. 211 F.3d 697 (2nd Cir. 2000). The Court cited to Lyndonville for the proposition that "nothing in the Victim and Witness Protection Act authorizes the victim of a criminal scheme to use a restitution order as the sole basis for imposing civil liability upon a third party who has assisted a perpetrator of a crime in evading a restitution order." September 21, 2005 Transcript of Closing Arguments, page 44:16-24. Lyndonville stands for the proposition that the Victim and Witness Protection Act did not create a separate and independent federal civil cause of action to obtain modification of the restitution order. Id. at 699. The government in this case, however, is not attempting to impose civil liability or a fine on Overley by means of a restitution order, but is simply seeking to make the crime victim whole by recovering an asset for the crime victim. The Victim and Witness Protection Act merely provides the government the tools to use civil remedies to enforce the Court's criminal restitution orders, which includes using equitable remedies to reach assets held by third parties. See 18 U.S.C. 3613 (2000). Trying to apply Lyndonville's holding to the facts of this case not only causes confusion, but is also just plain unworkable. For the foregoing reasons, the United States respectfully requests that this Court deny Overley's Amended Motion to Alter or Amend the Judgment and amend it judgment as justice demands.

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Case 1:03-cv-01041-PSF-BNB

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Respectfully submitted, JOHN W. SUTHERS United States Attorney

By:

S/ Christopher Alberto __________________________ Christopher Alberto Special Assistant U.S. Attorney U.S. Attorney's Office John Joseph Moakley United States Courthouse 1 Courthouse Way, Suite 9200 Boston, MA 02210

Certificate of Service

I hereby certify that a true copy of the above document was served upon David St. Germain, 4607 Timberglen, Apt. 2528, Dallas, TX 75287 by regular mail and Ty Gee by email at [email protected] August 11, 2005. S/ Christopher Alberto Christopher Alberto

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