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United States v. Preston

United States District Court, D. Columbia.

August 24, 2015

UNITED STATES OF AMERICA
v.
NANCY PRESTON, Defendant

          For NANCY PRESTON, Defendant: Jonathan Shapiro, GREENSPUN, SHAPIRO, DAVIS & LEARY, P.C., LEAD ATTORNEY, PRO HAC VICE, Fairfax, VA; Peter D. Greenspun, LEAD ATTORNEY, GREENSPUN SHAPIRO, PC, Fairfax, VA.

         For JAMES PRESTON, LAURA PRESTON, Movants: Mariam Wagih Tadros, LEAD ATTORNEY, REES BROOME, PC, Tysons Corner, VA.

         For USA, Plaintiff: Virginia Cheatham, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE FOR THE DISTRICT OF COLUMBIA, Washington, DC; Anthony D. Saler, U.S. ATTORNEY'S OFFICE, Criminal Division, Washington, DC.

         Re Document No.: 60

Page 109

         MEMORANDUM OPINION

         RUDOLPH CONTRERAS, United States District Judge.

         Granting Government's Motion to Dismiss James Preston's Petition Asserting an Interest in Cash Forfeited

         I. INTRODUCTION

         Defendant Nancy Preston was convicted of Mail Fraud in violation of 18 U.S.C. § 1341, and on December 12, 2014, this Court entered a Final Order of Forfeiture forfeiting $239,069 to the United States in the form of a money judgment pursuant to

Page 110

18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c). See Final Order of Forfeiture (" Final Order" ), ECF No. 22. On June 17, 2014, the Court amended the Final Order pursuant to Federal Rule of Criminal Procedure 32.2(e)(2)(A) to include as substitute property pursuant to 21 U.S.C. § 853(p) cash in one Merrill Lynch account held by Defendant's husband, James Preston, and certain securities in a separate Merrill Lynch account held by the James W. Preston Trust (the " Trust" ). See Fourth Amended Order of Forfeiture (" Fourth Amended Order" or " Order of Forfeiture" ), ECF No. 43. On July 29, 2014, James Preston filed a Petition asserting an interest in the substitute property pursuant to Federal Rule of Criminal Procedure 32.2 and 21 U.S.C. § 853(n). See James W. Preston's Petition Asserting an Interest in Property (the " Petition" ), ECF No. 48.

         The Government has filed a motion to dismiss the Petition as to its assertion of an interest in the cash held in Mr. Preston's Merrill Lynch account.[1] See Mot. Dismiss James Preston's Petition Asserting Interest in Cash Forfeited from Merrill Lynch Account Number 79522092 (" Motion to Dismiss" ), ECF No. 60.

         II. FACTUAL BACKGROUND

         From approximately 1992 to September 2011, Defendant Nancy Preston was the Corporate Controller for Clyde's Restaurant Group (" Clyde's" ). See Statement of the Offense at 1, ECF No. 6. On January 9, 2012, Ms. Preston confessed to agents of the Federal Bureau of Investigation (" FBI" ) that she had embezzled hundreds of thousands of dollars from Clyde's. See Decl. Supp. Gov't's Mot. Amend Order Forfeiture ¶ 4, ECF No. 42-1.

         Eleven days later, on January 20, 2012, there were two transfers from Merrill Lynch account number XXX-X1295 held by Ms. Preston (" Ms. Preston's 1295 Account" ) to Merrill Lynch account number XXX-X2092 held by her husband, James Preston (" Mr. Preston's 2092 Account" ): a cash transfer of $6,000 and a cash transfer of $5,500, for a total of $11,500 (the " Cash" ). See Petition at 2; Petition Ex. 2 at 16, ECF No. 48-1.[2] A statement for Merrill Lynch account number XXX-X3888 held by the Trust (the " Trust Account" ) indicates that the Trust was formed under an agreement dated the same day. See Petition Ex. 3. Three days later, on January 23, 2012, various securities (the " Securities" ) were transferred from Ms. Preston's 1295 Account to a separate account held by Mr. Preston, Merrill Lynch account number XXX-X1299 (" Mr. Preston's 1299 Account" ). Petition at 2; Petition Ex. 1 at 10.[3] In his Petition, Mr. Preston alleges that " [t]he reason for the

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transfers is simple: Once Merrill Lynch discovered Mrs. Preston's criminal activity, it closed her account, forcing Mrs. Preston to transfer her funds to Mr. Preston's account." Petition at 2. Soon thereafter, the Securities were transferred from Mr. Preston's 1299 Account to the Trust Account. See Petition at 2. Mr. Preston does not offer any explanation for this transfer in his Petition.

         Mr. Preston alleges that neither he nor Ms. Preston intended for him to receive a benefit as a result of the transfers and that he received no benefit. See Petition at 2-5. He alleges that Ms. Preston transferred the Securities and the Cash to him " so that he could pay her debts." Id. at 5. He further alleges that, in order to pay those debts, rather than use the Cash or liquidate the Securities, he " liquidated his own securities of the same value [as the Securities and the Cash[4]] because liquidating those securities would result in a lower tax liability for the Prestons." Id. at 2. Mr. Preston claims that he used the proceeds of that liquidation in order to pay $150,000 to the Government in a pre-judgment partial payment of Ms. Preston's restitution obligation, Ms. Preston's legal fees, and federal and state taxes. See id. at 3. As support, Mr. Preston cites a November 2012 account statement for the Trust Account, which lists an outgoing wire transfer of $150,000 on November 19, 2012. See Petition Ex. 3 at 33. He also provides Ms. Preston's federal tax return for 2012 and a ledger from Cameron McEvoy, PLLC. See Petition Exs. 4-5. In his Petition, Mr. Preston does not provide detail concerning which securities he liquidated or which account held those securities, and he does not provide any explanation for why the payment for Ms. Preston's restitution obligation was made from the Trust Account. Mr. Preston also does not explain how liquidating securities helped him avoid tax liability that he would have incurred had he used the Cash to make the restitution payment or why generally he could not use the Cash to make that payment.

         On August 29, 2012, the Government filed a Criminal Information against Ms. Preston in this Court, and on September 26, 2012, Ms. Preston pleaded guilty to mail fraud in violation of 18 U.S.C. § 1341. See Information, ECF No. 1; Minute Entry (Sept. 26, 2012). On September 26, 2012, the Court entered a Consent Order of Forfeiture forfeiting $389,069 to the United States in the form of a money judgment. See Consent Order of Forfeiture, ECF No. 9. On December 9, 2012, after the wire transfer from the Trust Account, the Government filed a consent motion seeking to reduce the forfeiture money judgment amount by $150,000 to account for " a partial payment to the victim as compensation for its loss." Consent Mot. for Final Order of Forfeiture, ECF No. 17. On December 12, 2012, the Court granted the consent motion, entering a Final Order of Forfeiture forfeiting $239,069 to the United States in the form of a money judgment pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c). See Final Order. The Final Order provided that the Court shall retain jurisdiction to enforce the Final Order and to amend it as necessary pursuant to Federal Rule of Criminal Procedure 32.2(e). See id.

         On June 17, 2014, the Court amended the Final Order to include the Cash and the Securities as substitute property pursuant to 21 U.S.C. § 853(p). See Fourth Amended Order. The Government served the Fourth Amended Order on Mr. Preston, his counsel, and the Trust on July 3, 2014.

Page 112

See Notice of Service, ECF No. 51. On July 29, 2014, Mr. Preston filed his Petition asserting his interest in the substitute ...


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