The opinion of the court was delivered by: Paul L. Friedman United States District Judge
This matter is before the Court on the motion of the defendant, Charles Ike Emor, to dismiss the criminal indictment against him or, in the alternative, for the return of seized property. The Court heard oral argument on the motion at a hearing held on June 27, 2011. Upon consideration of the parties' arguments, the relevant legal authorities, and the entire record in this case, the motion will be denied.*fn1
A. Allegations of the Indictment
The indictment alleges that Mr. Emor founded an entity called Sunrise Academy ("Sunrise") under the laws of the District of Columbia in 1999 as a tax-exempt, non-profit organization. Indict. ¶¶ 1-2. Mr. Emor served as the president and executive director of Sunrise and "maintained complete control over Sunrise financial affairs." Id. ¶¶ 1, 26. Organized as a private school providing special education services to male students between the ages of 7 and 22, Sunrise entered into contracts with the District of Columbia to enroll as students varying numbers of District of Columbia residents who were entitled under federal law to receive special education services but could not obtain those services in the District's public schools. See id.
¶¶ 2, 5-9. Between 2005 and 2009, Sunrise was paid more than $30 million under its contracts with the District. Id. ¶ 15. Some of Sunrise's funding derived from the federal Medicaid program, which reimbursed Sunrise for counseling services that the school claimed to have provided to students who were Medicaid beneficiaries. See id. ¶ 11.
According to the indictment, large amounts of District of Columbia and/or federal funds - almost $500,000 - that were paid to Sunrise were not used to provide special education services, but instead were improperly diverted by Mr. Emor to cover such personal expenses as rent, the college tuition of his adult son, child support payments, and the costs of a variety of consumer goods, including jewelry, art, electronics, and "luxury vehicles." Indict.
¶ 51. In addition to those funds that were drawn directly from Sunrise and used for Mr. Emor's personal expenses, Mr. Emor also siphoned approximately $2 million from Sunrise into the bank accounts of a shell corporation. See id. ¶¶ 35-36. That entity, called Core Ventures, LLC ("Core"), was organized by Mr. Emor as a for-profit, limited liability company under the laws of the District of Columbia in June 2008. Id. ¶ 18. At that time, Mr. Emor had been sentenced to a term of twelve months plus one day in prison following his conviction in this Court on one count of conspiracy to commit mail fraud in connection with a scheme to sell stolen computers. See United States v. Emor, Crim. No. 06-0064, Judgment (D.D.C. Aug. 30, 2007). In June 2008, when he formed Core, Mr. Emor had not yet begun serving that sentence, which had been stayed pending his appeal of his conviction. See Crim No. 06-0064, Order to Stay Execution of Sentence (D.D.C. Aug. 30, 2007).
In March 2009, while his criminal appeal was still pending, Mr. Emor began transferring funds from Sunrise's bank accounts to Core's account, which could be accessed at that time only by Mr. Emor. Indict. ¶¶ 18, 35. By mid-July 2009, when his conviction was upheld by the court of appeals, Mr. Emor had allegedly transferred nearly $400,000 from Sunrise to Core. Id. ¶ 35. On July 21, 2009, four days after his conviction was upheld, Mr. Emor opened a second Core bank account and added as a signatory to both Core accounts a Sunrise employee referred to in the indictment as "Employee #1" and elsewhere in the filings as "J.N." Id. ¶ 18. He also transferred another $1 million from Sunrise to Core accounts in August 2009. Id. ¶ 35.
The last transfer of funds from Sunrise to Core occurred on January 10, 2010, three days after Mr. Emor was informed that he would begin serving his term of imprisonment on January 20, 2010. Indict. ¶ 35; Crim. No. 06-0064, Order (D.D.C. Jan. 7, 2010). By that point in time, approximately $2 million had been shifted from Sunrise's bank accounts to Core's. See Indict. ¶ 35. Of those funds, only approximately $36,000 had been spent - on a 2006 Lexus purchased for Mr. Emor's personal use. Id. ¶ 38. Core Ventures, managed solely by Mr. Emor, "had virtually no business operations, produced no products, and did not provide any services or generate any revenue." Id. ¶ 18.
B. Indictment of Mr. Emor and Seizure of Assets
On May 18, 2010, a magistrate judge approved a warrant authorizing the seizure by the government of the funds held in Core's two bank accounts. See Opp., Ex. A. The magistrate judge found probable cause to believe that the assets were forfeitable based on the affidavit of an FBI special agent who described, among other things, Mr. Emor's formation of Core, his transfer of large amounts of money from Sunrise to Core, and Core's apparent lack of any sort of business activity. See id. ¶¶ 16-18, 26-30.
Beginning in August 2010, counsel representing Sunrise, Core, and/or Mr. Emor made several attempts to persuade the government to release the seized assets. In a letter to an Assistant United States Attorney dated August 6, 2010, attorney Peter R. Zeidenberg, acting on behalf of Sunrise, asserted that the money seized from Core's bank accounts had been a legitimate loan extended to Core by Sunrise so that Core could "open up coffee and smoothie shops in the area that would then hire former [Sunrise] students who were otherwise unable to find employment." Opp., Ex. B at 2. He claimed that the seized assets "belong to [Sunrise], . . . notwithstanding that [they were] temporarily residing in the account of Core Ventures." Id. at 3. According to Mr. Zeidenberg, Sunrise "desperately needed" the seized funds because it had "many outstanding and legitimate bills that it must pay" and was "unable to pay any severance to its nearly 50 teachers and aids [sic]." Id.
In response to Mr. Zeidenberg's letter, the government requested documentation of Sunrise's financial condition and of the loan that Sunrise claimed to have made to Core. See Opp., Ex. J at 1-4. Mr. Zeidenberg responded by sending another letter, dated September 1, 2010, in which, among other things, he asserted that "[t]he Government ha[s] asked [Sunrise] whether it intends to pay legal fees for the defense of its former Chairman, Charles Emor, and has either inquired or expressed concern on several occasions that [Sunrise] might use its funds to fund Mr. Emor's defense." Opp., Ex. K at 2. Mr. Zeidenberg did not specify who had expressed such "concern" or when the government had inquired whether Sunrise would pay the legal fees of Mr. Emor; the record contains no evidence, other that Mr. Zeidenberg's letter, that the government was interested in Mr. Emor's legal fees. The government notes that the sole reference to legal fees in its August 13, 2010 letter was to Sunrise's legal fees. See Opp., Ex. J at 3. Nevertheless, Mr. Zeidenberg went on in his September 1, 2010 letter to insinuate that the government was attempting to prevent Sunrise from paying Mr. Emor's legal expenses, in violation of the law and the policy of the Department of Justice. See Opp., Ex. K at 2. He further accused the government of sending the message that "if [Sunrise] wants this money back, it better ...