United States District Court, D. Columbia.
NANCY PRESTON, Defendant: Jonathan Shapiro, LEAD ATTORNEY,
PRO HAC VICE, GREENSPUN, SHAPIRO, DAVIS & LEARY, P.C.,
Fairfax, VA; Peter D. Greenspun, LEAD ATTORNEY, GREENSPUN
SHAPIRO, PC, Fairfax, VA.
JAMES PRESTON, LAURA PRESTON, Movants: Mariam Wagih Tadros,
LEAD ATTORNEY, REES BROOME, PC, Tysons Corner, VA.
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,
Document No.: 53.
CONTRERAS, United States District Judge.
Government's Motion to Dismiss James Preston's
Petition Asserting an Interest in Certain Merrill Lynch
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
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.
Government has filed a motion to dismiss the Petition as to
its assertion of an interest in the securities in the
Trust's Merrill Lynch account. See Mot. Dismiss
James Preston's Petition Asserting Interest in Certain
Merrill Lynch Securities (" Motion to Dismiss" ),
ECF No. 53. For the reasons explained below, the Court will
grant the Government's motion.
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.
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. 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, the following
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" ):
American Tower REIT Inc (HLDG Co) SHS
Tractor Supply Co
Lord Abbett Intl Core Equity Fund CL C
Pioneer Cullen Value Fund CL C
Franklin T/F Tr Va Tax Free Inc FD CL C
Pioneer Emerging Markets FD CL C
Lord Abbett Classic Stock Fund CL C
Royce Pennsylvania Mutual Fund CL Consult
Legg Mason Western Asset Managed
Municipals FD C
at 2; Petition Ex. 1 at 10. In his Petition, Mr.
Preston alleges that " [t]he reason for the 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
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 ] 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.
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.
17, 2014, the Court amended the Final Order to include
$11,500 from Mr. Preston's 2092 Account and the
Securities in the Trust Account 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.
See Notice of Service, ECF No. 51. On July 29, 2014,
Mr. Preston filed his Petition asserting his interest in the
substitute property. See Petition.
Government argues that the Petition should be dismissed with
respect to its assertion of an interest in the Securities,
because: (1) the Petition does not establish that Mr. Preston
has constitutional standing to contest the forfeiture; (2)
the Petition does not establish that Mr. Preston has
so-called " statutory standing" to contest the
forfeiture; (3) the Petition fails to satisfy the pleading
requirements of 21 U.S.C. § 853(n)(3); and (4) the
Petition fails to state a claim for relief under 21 U.S.C.
§ 853(n)(6). The Court addresses each of these issues in
Legal Framework for Adjudication of Third Party
preliminary matter, it is useful for the Court to provide an
overview of the legal framework for adjudicating a third
party's asserted interest in property ...