United States District Court, D. Columbia.
UNITED STATES OF AMERICA, Plaintiff: Oliver W. McDaniel, LEAD
ATTORNEY, U.S. ATTORNEY'S OFFICE, Civil Division,
JAMES W. PRESTON, Defendant: Mariam Wagih Tadros, Stephen D.
Charnoff, LEAD ATTORNEYS, REES BROOME, PC, Tysons Corner, VA.
NANCY PRESTON, Defendant: Sean Patrick Roche, LEAD ATTORNEY,
CAMERON/MCEVOY, PLLC, Fairfax, VA.
Document Nos.: 46, 47
CONTRERAS, United States District Judge.
Plaintiff's Motion for Summary Judgment and Denying
Defendant James W. Preston's Motion for Summary
United States of America (the " Government" ) filed
this civil action against
Defendants James W. Preston and his wife, Nancy Preston,
seeking to avoid certain transfers of property as fraudulent
pursuant to the Federal Debt Collection Procedures Act
(" FDCPA" ), 28 U.S.C. § § 3301 et
approximately 1992 until September 2011, Nancy Preston was
the Corporate Controller for Clyde's Restaurant Group
(" Clyde's" ). See Statement of the
Offense at 1, United States v. Preston, No.
12-cr-00189 (RC) (D.D.C. Sept. 26, 2012) (" Crim."
), ECF No. 6. In 2012, Ms. Preston was convicted of mail
fraud in violation of 18 U.S.C. § 1841 in this Court,
and, as part of her sentence, this Court ordered Ms. Preston
to pay restitution in the amount of $239,069 and a fine of
$62,000 to the United States. See Judgment, Crim.
ECF No. 25. Prior to her conviction and entry of the money
judgment, Ms. Preston transferred her interest in real
property that was jointly owned by herself and her husband,
as well as certain cash and securities that she held, to Mr.
Preston. The Government filed this civil action against Mr.
and Ms. Preston seeking to avoid those transfers as
fraudulent. During this litigation, the transferred cash and
securities were also the subject of an ancillary forfeiture
proceeding in Ms. Preston's criminal case, which this
Court resolved in favor of the Government. See
Order, Crim. ECF No. 74; Order, Crim ECF No. 77.
before the Court are cross-motions for summary judgment filed
by the Government and Mr. Preston. See Def.'s
Mot. Summ. J., ECF No. 46; Pl.'s Mot. Summ. J., ECF No.
47. Ms. Preston, proceeding pro se in this case, has
not moved for summary judgment and has not filed any response
to the present cross-motions for summary judgment. For the
reasons explained below, the Court will deny both
consideration of the evidentiary record submitted by the
parties, the Court finds that the following relevant facts
have been established or are not in dispute, except where
noted as a party's claim or a disputed fact.
Mr. Preston's Acquisition of the Windover Property and
Conveyance in 2008
August 1984, Mr. Preston purchased real property located at
295 Windover Avenue N.W., Vienna, Virginia 22180 (the "
Windover Property" ). See Def.'s Stmt.
Undisputed Material Facts (" Def.'s SOF" )
¶ 14, Def.'s Mem. Supp. Mot. Summ. J., ECF No.
Ms. Preston married over 20 years later, on December 30,
2004. See Pl.'s Stmt. Material Facts Not in
Genuine Dispute (" Pl.'s SOF" ) ¶ 2, ECF
No. 47-2. Nearly four years later, on November 25, 2008, Mr.
Preston executed a Deed of Gift conveying the Windover
Property to Ms. Preston and himself as tenants by the
entirety. See Def.'s Mot. Summ. J. Ex. 13 (the
" 2008 Deed of Gift" ), ECF No. 46-14. The text of
the 2008 Deed of Gift states that the property was conveyed
" without consideration" and, near the top of the
document, it states that consideration is " None."
Id. It also states that the conveyance is "
Exempt from Recordation Tax under § 58.1-811.D of the
Code of Virginia," which concerns deeds of gift without
consideration. Id. It also states that the
property's assessment was $789,270.00. Id. The
parties sharply dispute the terms and circumstances of this
and Ms. Preston submit sworn affidavits claiming that,
despite the language in the 2008 Deed of Gift, the conveyance
was part of an agreement between them that Ms. Preston would,
at some future point in time, pay Mr. Preston for her joint
interest. See Aff. James Preston (Feb.
19, 2015), Def.'s Mot. Summ. J. Ex. 2 (" Mr.
Preston's Feb. 2015 Aff." ) ¶ ¶ 19-20, ECF
No. 46-3; Aff. Nancy Preston (Feb. 19, 2015), Def.'s Mot.
Summ. J. Ex. 12 (" Ms. Preston's Feb. 2015
Aff." ) ¶ ¶ 18-19, ECF No. 46-13. Mr. Preston
Nancy Preston and I agreed that in exchange for placing Nancy
Preston's name on the title to the [Windover] Property,
Nancy Preston would pay me the value of her Clyde's stock
(which was seized by the Government) and the funds from the
sale of a property in Falls Church, Virginia, which sums were
held in her Merrill Lynch accounts. She would pay this amount
at the time that we combined our finances, which never
Preston's Feb. 2015 Aff. ¶ 19. He further states
that he conveyed his interest to himself and Ms. Preston
" with the understanding that she would pay me for that
interest in accordance with our agreement." Id.
¶ 20. Similarly, Ms. Preston states:
James Preston and I agreed that in exchange for placing my
name on the title to the [Windover Property], I would pay
James Preston the value of my Clyde's stock (which was
seized by the Government) and the net proceeds from the sale
of a property I separately owned in Falls Church, Virginia
that I acquired before my marriage to Mr. Preston, which sums
were held in my Merrill Lynch accounts. I intended to pay
these amounts at the time that we combined our finances,
which never occurred. In fact, James Preston and I still have
not combined our finances.
Preston's Feb. 2015 Aff. ¶ 18. The Prestons claim
that they kept (and still keep) their finances separate,
although they had planned to combine them. See Mr.
Preston's Feb. 2015 Aff. ¶ 19; Ms. Preston's
Feb. 2015 Aff. ¶ 18. Neither Mr. Preston nor Ms. Preston
claim that they had agreed upon any specific amount that Ms.
Preston would pay or any consequences in the event that Ms.
Preston did not or could not pay. They do not provide the
Court with any contemporaneous evidence of their agreement or
statements from any third party witnesses with knowledge of
the agreement. They also do not provide any explanation as to
why the deed was recorded as a deed of gift or why it
consistently refers to the conveyance as being without
Government disputes the Prestons' factual claim, largely
relying on the 2008 Deed of Gift's statement that there
was no consideration for the conveyance. See
Pl.'s Mem. Supp. Mot. Summ. J. at 18-19, ECF No. 47-1.
The Government also points to the deposition testimony of
Victoria Griffith, a former co-worker of Ms. Preston who was
terminated in connection with Clyde's investigation into
Ms. Preston's criminal conduct. See Victoria
Griffith Dep. Tr. (Jan. 23, 2015) at 13:6-18, Pl.'s Mot.
Summ. J. Ex. E (" Griffith Dep." ), ECF No.
48-5. Ms. Griffith testified
that she had at least one conversation with Ms. Preston in
which Ms. Preston discussed plans to refinance the Windover
Property in order to construct an additional garage and an
apartment on the property and she estimated that those
conversations took place around late 2008. See id.
at 27:18-28:9. Ms. Griffith also testified that the
Prestons' decision to place Ms. Preston's name on the
title to the Windover Property occurred around the same time.
See, e.g., id. at 28:11-15. When asked what Ms.
Preston told her about this decision, Ms. Griffith testified
that Ms. Preston said, " We refinanced the house, and
it's done, and we're moving forward on the
construction," and that Ms. Preston " elaborate[d]
to me that it was - you know, she was happy that her - she
was a part of the house now." Id. at
33:18-33:25. Ms. Griffith does not appear to have given
testimony concerning the purpose of the conveyance or whether
there was any consideration or other agreement. The Prestons
dispute Ms. Griffith's testimony, both stating that they
never discussed the Windover Property with her at any time.
See Aff. Nancy Preston (Apr. 17, 2015) ¶ 5,
Def.'s Opp. Pl.'s Mot. Summ. J. Ex. 4 (" Ms.
Preston's Apr. 2015 Aff." ), ECF No. 50-5; Aff.
James Preston (Apr. 17, 2015) ¶ 10, Def.'s Opp.
Pl.'s Mot. Summ. J. Ex. 3 (" Mr. Preston's Apr.
2015 Aff." ), ECF No. 50-4.
Confession and Transfers of Cash and Securities in Early
January 9, 2012, Ms. Preston confessed to agents of the
Federal Bureau of Investigation (" FBI" ) that she
had embezzled more than $600,000 from Clyde's, and this
interview began a process that led to Ms. Preston retaining a
criminal defense attorney to represent her, meeting with the
U.S. Attorney's Office, and ultimately pleading guilty to
mail fraud. See Stip. Regarding Testimony SA Mark
Stanley, Def.'s Mot. Summ. J. Ex. 14, ECF No. 46-15.
days later, on January 20, 2012, Ms. Preston made two cash
transfers from an account she held at Merrill Lynch, one
transfer of $6,000 and another transfer of $5,500 (the "
Cash" ), to a Merrill Lynch account held by Mr. Preston.
See Def.'s SOF ¶ 3. Three days after that,
on January 23, 2012, Ms. Preston transferred certain
securities valued at $190,529.27 (the " Securities"
) from her same Merrill Lynch account to a different Merrill
Lynch account held by Mr. Preston. See id. ¶ 4.
Preston claims that she made these transfers because two
Merrill Lynch representatives told her that she " would
no longer be able to maintain accounts at Merrill Lynch"
and claims that she had no " intent to hinder, delay or
defraud the Government." Ms. Preston's Feb. 2015
Aff. ¶ ¶ 4-5. Mr. Preston supports her claim.
See Mr. Preston's Feb. 2015 Aff. ¶ 5. The
Prestons also claim that, in making the transfers to Mr.
Preston, Ms. Preston " instructed [Mr. Preston] to use
the transferred funds to satisfy her personal financial
obligations, including her restitution obligations to the
Government arising from her plea agreement."
Id. ¶ 9. See also Ms. Preston's
Feb. 2015 Aff. ¶ 8. The Government challenges these
claims, providing a sworn declaration by an in-house counsel
to Merrill Lynch stating that " [a]t no time did Merrill
Lynch ask Mrs. Preston to close" her account and that
Merrill Lynch continued to maintain Ms. Preston's account
for over two-and-a-half years until it was " purged from
the Merrill Lynch system following thirteen months of
inactivity" on August 30, 2014. Decl. Greg Rose ¶
1, Pl.'s Mem. Opp. Def.'s Mot. Summ. J. Ex. B ("
Rose Decl." ), ECF No. 51-4. Neither party provides any
testimony from the Merrill Lynch representatives
that actually met with Ms. Preston. It is clear, however,
that Ms. Preston's account continued to remain open and
active for at least nine months following the transfers, as
Mr. Preston paid Ms. Preston's attorneys on her behalf
from Ms. Preston's account in March 2012 and as late as
October 5, 2012. See Mr. Preston's Feb. 2015
Aff. ¶ ¶ 11-14.
February 7, 2012, the Securities, along with other securities
held in Mr. Preston's account, were transferred to a
separate Merrill Lynch account held by the James W. Preston
Trust (the " Trust" ). See Def.'s SOF
¶ 4; Decl. Mary McAllister, Pl.'s Mot. Summ. J. Ex.
A (" McAllister Decl." ) at 22-28, ECF No. 48-1.
The Prestons do not provide any explanation for this
transfer. Documents indicate that the Trust was
formed by an agreement dated January 20, 2012, the same day
that Ms. Preston transferred the Cash to Mr. Preston's
account, and that Mr. Preston is the grantor of the Trust and
its sole trustee. See McAllister Decl. ¶ 9;
id. at 29-30.
Transfer of the Windover Property in April
April 4, 2012, Mr. and Ms. Preston executed a Deed of Gift
conveying their joint interest in the Windover Property to
Mr. Preston " for his sole and equitable estate,"
removing Ms. Preston's name from the title. See
Deed of Gift dated April 4, 2012 (" 2012 Deed of
Gift" ), Pl.'s Mot. Summ. J. Ex. F (" Title
Report" ) at 6-8, ECF No. 48-6. The text of the 2012
Deed of Gift states that the property was conveyed " in
consideration of the sum of Ten Dollars ($10.00)," but,
near the top of the document, it states that consideration is
" None." Id. at 6-7. It states that the
Windover Property's assessment was $934,370.00.
Seeid. at 6. It also states that the
conveyance is exempt from Virginia's recordation tax
" as a transfer pursuant to a written incident to a
divorce," id., but the Prestons have stated
that this " appears to be a typo or mistake by the
closing agent." Answer of James Preston at 2 ¶ 8,
ECF No. 24; Answer of Nancy Preston at 2 ¶ 8, ECF No.
25. The Prestons remained ...