United States District Court, E.D. Kentucky, Central Division
[Copyrighted Material Omitted]
For Bank of America, N.A., Dft in 5:08-cv-410-KKC, Respondent: Jason A. Mosbaugh, Weltman, Weinberg & Reis Co., LPA, Cincinnati, OH.
For American Oil and Gas, Claimant in 5:08-cv-410-KKC, Corrie Anderson, Claimant in 5:08-cv-410-KKC, Megan Coffman, Claimant in 5:08-cv-410-KKC, Dacorta, LLC, Claimant in 5:08-cv-410-KKC, Claimants: Brian M. Johnson, Bingham Greenebaum Doll LLP - Lexington, Lexington, KY.
For Baniel, LLC, Claimant in 5:08-cv-410-KKC, Claimant: Adam Clay Reeves, Brian M. Johnson, Bingham Greenebaum Doll LLP - Lexington, Lexington, KY.
For Bryan S. Coffman, Claimant in 5:08-cv-410-KKC, Claimant: Brian M. Johnson, Bingham Greenebaum Doll LLP - Lexington, Lexington, KY; Steven Rush Romines, Romines, Weis & Young, PSC, Louisville, KY.
For James A. Skinner, Movant: Joseph A. Woodruff, LEAD ATTORNEY, Waller, Lansden, Dortch & Davis, LLP, Nashville, TN.
For USA, Plaintiff in 5:08-cv-410-KKC, Movant: Wade Thomas Napier, U.S. Attorney's Office, EDKY, Lexington, KY.
For Danny Butler, Movant: Elmer J. George, LEAD ATTORNEY, Lebanon, KY.
For USA, Plaintiff: Kenneth Taylor, LEAD ATTORNEY, Brandon Wayne Marshall, Robert M. Duncan, Jr., Wade Thomas Napier, Wade Thomas Napier, U.S. Attorney's Office, EDKY, Lexington, KY; Elaine K. Leonhard, U.S. Attorney's Office - Ft. Mitchell, Ft. Mitchell, KY.
KAREN K. CALDWELL, CHIEF UNITED STATES DISTRICT JUDGE.
OPINION AND ORDER
This matter is before the Court on the motions for final order of forfeiture (DE 640, 644) filed by Petitioners Megan Coffman, Dacorta, LLC, Baniel, LLC, and Corrie Anderson. For the following reasons, the motions will be GRANTED and a final order of forfeiture will be issued consistent with this opinion and order.
After a jury trial, defendants Bryan Coffman and Gary Milby were found guilty of mail fraud, wire fraud, securities fraud, and money laundering. The indictment charged Bryan Coffman with running an investment scheme in which he defrauded investors by misrepresenting the value or existence of various oil and gas investments and transferred millions of dollars of investor funds into personal accounts. Megan Coffman, Bryan's wife, was also charged with multiple counts of money laundering with regards to the proceeds of the fraud but was acquitted of all charges.
The indictment charged that the fraud took place from 2004 through 2009 and that the Defendants implemented the scheme through three companies: Mid-America Energy, LLC, Mid-American Energy, Inc., and Global Energy Group. The indictment described two phases of the scheme: the Mid-America phase, which lasted from 2004 until early 2008, and the Global phase, which lasted from mid-2007 until December 2009. At trial and in the forfeiture proceedings, the government proved that the proceeds derived from the fraud were at least $33,000,000. Securities and Exchange Commission Investigator Keith Hunger traced $19,300,000 in investor funds to the Mid-America phase of the scheme. United States Postal Inspection
Service analyst Ryan Lee testified that investor deposits for the Global phase of the fraud totaled $16,197,125.02.
Bryan waived his right to a jury trial on the forfeiture allegations in the indictment. The government moved for a preliminary order of forfeiture with regard to $33 million, 13 financial accounts, two pieces of real property and a yacht, arguing that they were subject to forfeiture under 18 U.S.C. § § 982(a)(1) and 981(a)(1)(C). The first of those provisions pertains to money-laundering crimes and provides that that the Court must order that a defendant convicted of those crimes forfeit any property " involved in" the offense or any property that is traceable to the property involved in the offense. The term property " involved in" the offense includes " the money or other property being laundered (the corpus) . . . and any property used to facilitate the laundering offense." United States v. McGauley, 279 F.3d 62, 76 n. 14 (1st Cir. 2002) (quoting United States v. All Monies in Account No. XX-X617-3, 754 F.Supp. 1467, 1473 (D. Haw. 1991)).
The second forfeiture provision -- § 981(a)(1)(C) -- pertains to Bryan's mail- and wire-fraud convictions and provides that any property that constitutes or is derived from the proceeds traceable to such a violation is subject to forfeiture.
During the proceedings on the preliminary order of forfeiture, Bryan did not object to the forfeiture of three of the accounts containing investor funds. These accounts are identified as Megan's American Founders Bank account 3826, Bryan's Wachovia account 4179, and Wachovia account 2871 under the name of American Oil & Gas. After briefing by the parties and a hearing, the Court issued an opinion in which it determined that the funds in all 13 of the financial accounts at issue were subject to forfeiture because they were involved in or facilitated money laundering. The Court denied the government's motion for forfeiture on one of the pieces of real property -- the Coffmans' residence at 4816 Chaffey Lane. The Court determined that the second piece of real property -- a condominium in South Carolina -- and the yacht were subject to forfeiture because they were both purchased with the proceeds of the crime and directly involved in money laundering.
On the government's motion, the Court later entered a second preliminary order of forfeiture, finding that certain additional pieces of property were subject to forfeiture as substitute assets under 21 U.S.C. § 853(p). That provision provides that, where the government is unable to locate property subject to forfeiture, it can seize " substitute property" of the same value. The substitute property here consisted of two automobiles and eight pieces of real property located in Lexington, Kentucky, including the residence at 4816 Chaffey Lane.
Megan, her sister, Corrie Anderson, and two companies which are solely owned by Megan -- Baniel, LLC and Dacorta, LLC -- moved for an ancillary hearing pursuant to 21 U.S.C. § 853(n), asserting that they have a right to some of the forfeitable property. (DE 462, 463, 464, 465). Megan and Dacorta assert an interest in the funds in a total of 11 bank accounts;  Megan asserts an interest in the eight pieces of real property located in Lexington; Baniel asserts an interest in the
yacht; and Corrie asserts an interest in the South Carolina condo.
The Court permitted the parties to conduct discovery on these issues and to file motions for summary judgment. The Court denied motions for summary judgment by the U.S. and by the Petitioners and conducted hearings on March 5 and 6, 2013. (DE 633, 634).
A. The 11 Financial Accounts
Megan asserts an interest in the funds in nine financial accounts held in her name. Her company, Dacorta, asserts an interest in the funds in two accounts.
As discussed above, this was an exceedingly profitable fraud, generating at least $33 million between 2004 and 2009. For that reason, the case presents an extremely complex money-laundering operation. USPIS analyst Lee testified that he reviewed a total of 57 bank accounts opened by Megan or Bryan at seven or eight banks, most of which were opened during the timeframe of the fraud. (DE 374, Lee Test. at CM-ECF p. 32; Ancillary Hr'g Govt. Ex. 28)
It appears that the government has been unable to track a huge portion of the total fraud proceeds. The accounts at issue in these ancillary proceedings contained less than $3 million at the time the government seized them. There is no dispute that more than half of the money in the accounts at the time of seizure consisted of direct proceeds from the fraud. To be exact, Megan concedes that $1,419,157.37 in these accounts consisted of direct proceeds of the fraud. For this reason, the Court determined in its preliminary order of forfeiture that all of the funds in all of the accounts were subject to forfeiture because they were all involved in or facilitated the money laundering offenses.
Megan does not seek to obtain any of the known investor proceeds in the accounts. The government's rights to those funds vested at the time of the fraud that produced them. See 21 U.S.C. § 853(c) (providing that the government's interests in property subject to forfeiture vests at the time of the criminal act subjecting the property to forfeiture). But Megan asserts a right to the remaining $1,342,013.63 in the accounts. She argues she has a legal right to those funds that was vested at the time of the acts giving rise to the forfeiture and, thus, she is entitled to the funds under 21 U.S.C § 853(n)(6)(A).
Megan argues that, despite the complex money laundering operation, resolution of her claim to the funds is pretty simple. First, she argues, the Court should look to the names on the accounts. There is no dispute that each account is under the name of either Megan or Dacorta. Second, Megan argues that the Court should rule that Megan or Dacorta gets all of the ...