Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 1 of 9 PageID #:1

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1 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 1 of 9 PageID #:1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION MICHAEL P. O DONNELL ) Petitioner, ) vs. ) ) FEDERAL BUREAU OF ) INVESTIGATION, ) ) Respondent. ) ) MOTION TO SET ASIDE FORFEITURE MICHAEL O DONNELL ( Michael ), by and through his counsel, Bradley H. Foreman, moves this Court for entry of an order pursuant to 18 U.S.C. 983, and to 28 U.S.C. 1331, setting aside a forfeiture of assets, and in support thereof states as follows: I. BACKGROUND Michael resides in the State of Florida, and is a citizen of the United States. This Court has jurisdiction of this motion pursuant to the federal Civil Asset Forfeiture Recovery act ( CAFRA ), 18 U.S.C. Section 983. The events giving rise to this case began in 2009, when Michael was divorced in Georgia from Tara Kersch ( Tara ). 1 Among other things, the divorce court found that Tara had committed various fraudulent acts and acts of willful misconduct, and awarded substantial sanctions, damages, and attorneys fees to Michael. Amounts owed to Michael include child support and unpaid health insurance benefits for his minor child, in addition to other amounts. Within only a few weeks after the Georgia court found Tara in criminal contempt, Tara filed a Chapter 13 bankruptcy in the United States District Court for the Northern District of Illinois on April 19, Michael was Tara s 1 The facts stated herein are supported by the Affidavit of Michael O Donnell.

2 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 2 of 9 PageID #:2 largest creditor and her only priority creditor, and as such, was entitled to full payment of his claims pursuant to Chapter 13 of the United States Bankruptcy Code. Moreover, as would later become evident, Tara in fact was possessed of assets which could be applied to payment of her debts, including her debt to Michael. As discussed below, following dismissal of the bankruptcy, those very assets which could have been applied to Tara s debts were seized by the FBI. The seized assets have not been used to pay Tara s creditors, including Michael. At no time was the FBI or the United States a creditor of Tara. Just as he had actively enforced his rights in the divorce court, Michael actively enforced his position in the bankruptcy court. He filed a motion to dismiss Tara s bankruptcy. On or about January 13, 2011, following an evidentiary hearing, Judge Benjamin Goldgar of the United States Bankruptcy Court dismissed Tara s bankruptcy proceeding, citing numerous acts of false statements, misrepresentations of her assets and income both in and out of court, and other acts. Before and during the bankruptcy, Michael had sought to collect the child support, benefit payments, and other moneys owed by Tara. Michael was Tara s largest priority creditor, and would have had a priority claim to her assets in her bankruptcy, or in the event of any civil judgment collection proceedings. Tara was in fact possessed of assets which could be used to pay Michael and other creditors, but she tried to hide those assets from the bankruptcy court. However, based in part on information supplied by Michael, on or about January 14, 2011, the FBI applied for a search warrant in the United States District Court for the United States District Court for the Eastern District of Tennessee. The search warrant was based on suspicion of criminal bankruptcy fraud. The FBI executed the warrant in Vonore, Tennessee, on January 14, 2011, and located a safe. Using a key supplied by Michael, the FBI opened the safe and found substantial assets 2

3 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 3 of 9 PageID #:3 belonging to Tara, including $149, in cash, valuable jewelry, and other items, all of which had been hidden from the bankruptcy court. Thereafter, on dates unknown to Michael, the federal government, on information and belief, claimed to have seized the above mentioned property from Tara under several federal statutes. However, despite the fact that Michael was Tara s largest priority creditor, and that he had been the one to bring the undisclosed assets to the attention of the federal government, no notice of the seizure was supplied to Michael in time for him to make a claim on the seized assets. Both Michael and his attorney had been in direct frequent contact with the FBI, yet no written notice was ever sent directly to Michael or his attorney that the assets were seized. At no time was the United States a creditor of Tara, and the United States had no claim to the seized assets other than for use as evidence in a criminal prosecution of Tara for bankruptcy fraud. Following dismissal of the bankruptcy, Michael took more steps to enforce his civil remedies; among other things, he caused a citation to discover assets to be issued by the United States Bankruptcy Court for the Northern District of Illinois to the Federal Bureau of Investigation in March Pursuant to state law procedures, the service of the citation to discover assets upon the FBI created a lien on all assets of Tara then in possession of the United States Government. Notwithstanding the citation proceedings, representatives of the federal government assured Michael that the seized assets were in possession of the government, that the seized assets would be held as evidence in the criminal prosecution, and that the seized assets would be available for creditors of Tara at the conclusion of the criminal case. In 2013, the United States indicted Tara for criminal bankruptcy fraud in the United States District Court for the Norther District of Illinois. On or about April 24, 2014, Tara pled guilty and 3

4 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 4 of 9 PageID #:4 was sentenced to 16 months in a federal penitentiary for bankruptcy fraud. During the criminal proceeding, Michael was repeatedly told by federal officials representing the United States that the seized assets remained in possession of the FBI, and that the federal government would be seeking restitution from Tara as a method of restoring the seized assets to Michael to be applied on is judgment. Among other things, Michael was specifically named as a victim of Tara s bankruptcy crime and received notification from the Victim Witness Coordinator regarding the status and progress of the criminal prosecution, and was requested to supply a victim impact statement to the court. Despite such assurances from federal officials, when Tara was sentenced for her crimes, no provision was made for restitution, or otherwise for disposition of the seized assets. In fact, federal prosecutors expressly told Judge Chang that restitution was not being sought from Tara for the victims of her bankruptcy crime. II. THE SEIZURE SHOULD BE SET ASIDE AS TO THE CLAIMS OF MICHAEL O DONNELL. At all times pertinent hereto there was in full force and effect the provision of the Civil Asset Forfeiture Reform Act of U.S.C et seq. This Court has jurisdiction to hear this motion pursuant to Section (e) which states as follows: (e) MOTION TO SET ASIDE FORFEITURE. (1) Any person entitled to written notice in any nonjudicial civil forfeiture proceeding under a civil forfeiture statute who does not receive such notice may file a motion to set aside a declaration of forfeiture with respect to that person s interest in the property, which motion shall be granted if (A) the Government knew, or reasonably should have known, of the 4

5 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 5 of 9 PageID #:5 moving party s interest and failed to take reasonable steps to provide such party with notice; and (B) the moving party did not know or have reason to know of the seizure within sufficient time to file a timely claim. This Court has jurisdiction to review a claim that notice of an administrative seizure and proposed forfeiture was constitutionally deficient under the general federal question statute, 28 U.S.C See Chairez v. United States, 355 F.3d 1099, 1101 (7th Cir.2004); United States v. Howell, 354 F.3d 693, 695 (7th Cir.2004). CAFRA explicitly states that an aggrieved party could move to set aside even a completed forfeiture if notice of the administrative forfeiture proceedings were not received. This case fits squarely within this statute. Despite being on notice of Michael s claim to Tara s assets, the FBI took no reasonable action to directly notify Michael of the seizure in a timely manner. The FBI did not furnish notice to plaintiff within 60 days of the seizure in accordance with the statute. The FBI did not obtain a criminal indictment against Tara Kersch within 60 days of the seizure. The FBI at no time sought to extend the time for such notice by a motion presented to this court or to any other court. Michael attempted to file an administrative claim to the seized assets as soon as he became aware of the seizure, but the FBI did not act on the claim in any manner and did not initiate a court process to declare civil forfeiture. Instead, after Tara pled guilty and the government failed to seek restitution, then and only then did the government take the position that Michael s claim to the seized assets was untimely. In addition, Michael was at all times an innocent owner within the meaning of CAFRA.. Under the statute, a party claiming to be an owner of property sought to be forfeited yet who has 5

6 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 6 of 9 PageID #:6 not played any part in the alleged illegal activity may seek relief from forfeiture as an innocent owner under 18 U.S.C. 983(d). Under the code s innocent owner defense, relief can be granted if the claimant: 1) did not know of the conduct giving rise to the forfeiture, 18 U.S.C. 983(d)(2)(A)(I); U.S. v. One Silicon Valley Bank Account, , in the Amount of One Hundred Thirteen Thousand Nine Hundred Fifty-Two and 62/100 Dollars, 549 F.Supp.2d 940 (W.D. Mich. 2008); or 2) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could have been expected to terminate the such use of the property, 18 U.S.C. 983(d)(2)(A)(ii); U.S. v. Lot Numbered One of Lavaland Annex, 256 F.3d 949 (10th Cir. 2001). As for what a person reasonably could be expected to do, this includes turning in the user of the property who is committing a crime or revoking or attempting to revoke permission to use the property. 18 U.S.C. 983(d)(2)(B)(I). Michael acted diligently and reasonably at all times in this matter. There is no evidence that he knew of the conduct giving rise to the forfeiture. When Tara filed bankruptcy, it was Michael who supplied the information to the FBI that lead to her prosecution for bankruptcy fraud. Thus, Michael did all he could have been expected to do upon leaning of the conduct. He first attempted civil enforcement. He also actively pursued his claims and rights as a priority creditor in bankruptcy. Once the bankruptcy was dismissed, he resumed pursuit of his claims via civil process. Once Tara was indicted, he was granted standing as a victim and attempted to pursue his claims as restitution claims, only to be told at the eleventh hour that the government would not seek restitution from Tara for the impact of her crime on her victims. In this case, as a priority creditor, Michael had a superior claim to such assets, and any claim asserted by the federal government was and is inferior to Michael s rights. The Bankruptcy Code would have required 6

7 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 7 of 9 PageID #:7 full payment from Tara. Under Section 1322(a) of the Bankruptcy Code, 11 U.S.C. Sec. 1322(a), any Chapter 13 plan shall provide for the full payment, in deferred cash payments, of all claims entitled to priority... Also, under Section 1325, 11 U.S.C. Sec. 1325, no such plan is confirmable by the bankruptcy court unless the debtor has paid all amounts that are required to be paid under a domestic support obligation and that first become payable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute, to pay such domestic support obligation. Thus, had Tara not committed bankruptcy fraud, she would have had to provide for her minor son and pay other domestic support related obligations to Michael in full in order to meet the requirements of the Bankruptcy Code. Moreover, Tara would have had to fully pay Michael for another reason: she had liquid assets which should have gone to her creditors and thus could not have satisfied the liquidation test under Chapter 13 without full payment. This is because Section 1325(a)(4) of the Bankruptcy Code, 11 U.S.C. 1325(a)(4) states that the plan cannot be confirmed unless... the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7... In other words, had Tara listed all of her assets in her bankruptcy, the cash and jewelry she had hidden in her mother s house in Tennessee would have gone to her creditors. Instead, once the bankruptcy was dismissed, the government seized the assets, gave insufficient notice to the very same creditors who had fought the bankruptcy, and has now claimed ownership of those assets which should have gone to creditors. The retention of Tara s assets in derogation of Michael s claims violates the fundamental principles of justice, equity, and good conscience. The government has no claim to such assets, and had reaped a windfall to Michael s 7

8 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 8 of 9 PageID #:8 detriment. The value of the assets seized from Tara is not known with certainty, but is believed to be far in excess of amounts owed to Michael. The seizure without notice was also in violation of Michael s due process rights. The Fifth Amendment to the United States Constitution states as follows in relevant part: No person shall be... deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. On or about January 14, 2011, the United States, acting through the FBI, seized substantial assets from the home of the mother of Tara Kersch. Prior to the seizure, Michael had been awarded judgment against Tara Kersch for fraudulent acts, for wilful failure to pay child support for her minor child, for wilful failure to maintain health insurance for her minor child, for wilful violation of a restraining order, and for other acts.. On January 14, 2011, the seized assets were subject to civil judgment enforcement proceedings to be applied to Michael s judgment. The actions of the United States caused Michael to be deprived of his ability to institute civil enforcement proceedings, prevented him from asserting a claim for those assets according to the administrative procedures that might have been available to him had he been notified of the seizure in a timely manner, and amounted to a deprivation of property without due process of law in violation of the Fifth Amendment of the United States Constitution. The federal government knew of Michael s claims at the time of the seizure, knew that he was a priority creditor, and in fact would not have been aware of her bankruptcy crimes nor come into possession of the seized assets without information supplied by Michael. WHEREFORE, Michael O DONNELL prays for entry of an order setting aside the 8

9 Case: 1:14-cv Document #: 1 Filed: 09/29/14 Page 9 of 9 PageID #:9 forfeiture described here. Bradley H. Foreman The Law Offices of Bradley H. Foreman, P.C. 900 West Jackson Blvd. Suite 7E Chicago, IL (312) ARDC # MICHAEL O DONNELL By: /s/ Bradley H. Foreman His Attorney 9