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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 11-cv-02106-PAB-CBS

UNITED STATES OF AMERICA,

Plaintiff,

v.

927 COLE STREET, GOLDEN, COLORADO, and

2008 TOYOTA HIGHLANDER, VIN # JTEES42A182076495,

Defendants.

_____________________________________________________________________

REPLY TO CLAIMANT’S RESPONSE TO PLAINTIFF’S MOTION FOR SUMMARY 

JUDGMENT

______________________________________________________________________

The United States of America, by and through Attorney General of the United 

States Eric Holder, Barry R. Grissom, United States Attorney for the District of Kansas, 

and through Special Attorney, Assistant United States Attorney Tonya S. Andrews,

respectfully replies to Claimant’s Response to Plaintiff’s Motion for Summary Judgment.

(Doc. 82). In support thereof, the United States submits the following:

REPLY CONCERNING UNDISPUTED FACTS

The government has no additional reply to the undisputed facts set forth in 

paragraphs one through thirty-four. The government will respond to Claimant’s 

Additional Listing of Undisputed Facts, by the following:

1-5. Admit.

6. Admit the amount was roughly $910,000.00. However, the exact amount 

is set forth in paragraph 22 of the government’s Motion for Summary Judgment, 

which claimant admits as accurate.

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7-16. Admit.

17. Admit that the SEC action never mentioned any involvement of Marie 

Dalton in the scheme. Deny the remaining as incomplete. Marie Dalton is 

mentioned under Dalton’s Misappropriation of Investor Funds in Section III of the 

SEC Complaint. In Paragraph 34, the Complaint states that Marie Dalton acquired

defendant Cole Street using fraudulent investor funds provided by her husband 

Richard Dalton. (Doc. 82, Exhibit D, ¶ 34).

18-29.Admit.

RESPONSE CONCERNING DISPUTED FACTS

30. Admit.

31. Admit that claimant did not have personal knowledge. Deny that claimant 

Magnani did not possess knowledge as a matter of law as argued herein.

REPY TO CLAIMANT MAGNANI’S ARGUMENT

The government and claimant Magnani both agree that defendant Cole Street is 

subject to forfeiture because it was purchased by the Daltons with illegally obtained 

investor funds. (Docs. 78, 82, ¶¶ 1-24). Therefore, the government respectfully 

requests that the Court enter summary judgment as to the forfeitability of defendant 

Cole Street. Furthermore, the undisputed facts establish that claimant Magnani’s 

innocent ownership claim fails as a matter of law.

I. The Interplay of State and Federal Law for Establishing Innocent 

Ownership 

The question of a claimant’s ownership interest in the defendant property 

requires an analysis of both state and federal law. State law is used to determine what

property interest claimant has, and at what time that interest arose. Federal law is then 

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used to determine if that state interest is “sufficient to defeat the Government’s interest 

in the property under the federal forfeiture statute.” United States v. 392 Lexington 

Parkway South, 386 F. Supp. 2d 1062, 1069 n. 10 (D. Minn. 2005) (citation omitted). 

Therefore, once a claimant shows a valid property interest under state law, the claimant 

must establish that the ownership interest meets the innocent ownership requirements 

set forth in 18 U.S.C. § 983(d) under federal law.

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Claimant argues that he is a bona fide purchaser because under Colorado law a 

judgment lien creditor has the same rights as a bona fide purchaser for value. 

However, claimant Magnani’s interest, as determined by state law, must actually meet 

the definition of a bona fide purchaser for value under federal law. 18 U.S.C. §

983(d)(3)(A)(i)-(ii). Claimant Magnani’s judgment lien interest fails to meet the federal 

definition. 

A. Claimant Magnani Did Not Exchange Value for a Property 

Interest in Defendant Cole Street

Claimant Magnani is not a bona fide purchaser for value of defendant Cole 

Street. The bona fide purchaser prong of the innocent owner defense is derived directly 

from commercial law, and protects “the title of a purchaser who acquires property for 

valuable consideration and who, at the time of the purchase, is without notice that the 

seller lacks valid and transferable title in the property.” United States v. Real Property 

Located at 6124 Mary Lane Drive, No. 3:03CV580, 2008 WL 3925074, at * 3 (W.D.N.C. 

Aug. 20, 2008) (citing United States v. Lavin, 942 F.2d 177, 186 (3d. Cir. 1991)). The 

“claimant must be a purchaser, meaning the claimant gave something of value, and 

 1 Claimant Magnani’s sole challenge is that he meets the definition of a bona fide 

purchaser for value who was reasonably without cause to believe that defendant Cole 

Street was subject to forfeiture. Therefore, the government will not discuss innocent 

ownership under 18 U.S.C. § 983(d)(2).

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received property in return. Creditors and victims are not ‘purchasers’ because they did 

not acquire an interest in the defendant property, they acquired only a contractual debt.” 

United States v. BCCI Holdings (Luxembourg), S.A., 69 F. Supp. 2d 36, 61 (D.D.C. 

1999). The court further explained that “a creditor who attempts to satisfy the debt by 

obtaining a judgment lien . . . is not a bona fide purchaser of that property because he 

has given nothing of value in exchange for the property interest. This is so irrespective 

of how the antecedent debt came into existence.” Id. at 62. 

Despite claimant Magnani’s assertion he is a “purchaser” because he invested 

an interest in the fraud scheme, he did not purchase an interest in defendant property. 

(Doc. 82, p. 12). His investment with UCR and Richard Dalton on November 12, 2009, 

for the sole purpose of investing in the buying and selling of precious gems did not 

convey a legal interest in defendant Cole Street. (Doc. 82, Exhibit A, ¶ 2). In fact, 

when he invested defendant Cole Street had been purchased in its entirety with

previous investors’ funds on July 2, 2009. (Doc. 82, p. 5, ¶ 12; Exhibit A ¶¶ 7-10).

Indeed, claimant Magnani’s interest in defendant Cole Street is based solely on 

an in personam judgment, not a purchase. On December 12, 2011, over two years 

after he invested with UCR, he filed his default judgment in his lawsuit against Marie 

Dalton in Jefferson County as a judgment lien creditor. Id. at ¶ 10. Although claimant 

Magnani has a properly filed judgment lien, he nevertheless does not meet the definition 

of “purchaser” to qualify as a bona fide purchaser under the federal statute, 18 U.S.C. § 

983(d)(3)(A)(i). 

B. Claimant Magnani Had Knowledge that Defendant Cole Street 

was Subject to Forfeiture

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In addition, claimant Magnani cannot claim ignorance under the knowledge prong 

of Section 983(d)(3)(A)(ii) either. The knowledge prong of the innocent owner statute 

states that a claimant must prove he “did not know and was reasonably without cause to 

believe that the property was subject to forfeiture.” 18 U.S.C. § 983(d)(3)(A)(ii). 

As an initial matter, claimant’s argument in pages thirteen through sixteen that he 

lacked knowledge from the time of his investment through his lawsuit against Marie 

Dalton is irrelevant. The proper time for determining claimant’s knowledge is on the 

date the claimant’s property interest was created, which is December 12, 2011, the date 

claimant recorded his judgment in Jefferson County. 18 U.S.C. § 983(3)(A); see United 

States v. 198 Training Field Road, No. Civ. A 02-11498, 2004 WL 1305875, at * 3 (D. 

Mass. June 14, 2004). 

Then the “proper test to be applied under the statute is not merely whether the 

petitioner had knowledge of the forfeitability of the asset but whether the petitioner 

reasonably held the belief that the property was not subject to forfeiture.” Real Property 

Located at 6124 Mary Lane Drive, 2008 WL 3925074, at * 4 (quotations omitted); (citing 

United States v. Reckmeyer, 836 F.2d 200, 204 (4th Cir. 1987)).

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 This standard is, 

therefore, mostly an objective one. Id. Clearly, a “genuinely-held belief that property is 

not subject to forfeiture is unavailing unless that belief was objectively reasonable in the 

circumstances.” Id. Claimant Magnani’s belief was not objectively reasonable for the 

following two reasons: (1) claimant Magnani was aware of the underlying criminal acts 

 2 Historically, the innocent owner defense only existed in the criminal forfeiture statute 

until the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), which codified the 

affirmative defense in 18 U.S.C. § 983. The language in both the criminal and civil

provisions is now almost identical, and the interpretation set forth in criminal cases has 

been applied in civil forfeiture actions. Real Property Located at 6124 Mary Lane Drive, 

2008 WL 3925074, at * 3; see 21 U.S.C. § 883(n)(6)(b); 18 U.S.C. § 983(d)(3). 

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and the purchase of defendant Cole Street with fraudulent investor funds prior to his 

property interest; and (2) by operation of law under the recording statutes, claimant 

Magnani had constructive notice of the government’s action.

1. Claimant Magnani Had Knowledge that Defendant Cole 

Street was Purchased With Fraudulent Funds

First, despite claimant’s argument, the knowledge prong does not mean the 

claimant has to know about a specific forfeiture action or specific forfeiture laws; “it 

requires that the innocent owner be ignorant of the fact that the property was involved in 

or traceable to a criminal violation.” United States v. An Interest in Real Property 

Located at 2101 Lincoln Blvd., 729 F. Supp. 2d 1150, 1154 (C.D. Cal. 2010) (emphasis 

in original). 

Claimant Magnani was not ignorant of the fact that defendant Cole Street was 

purchased with proceeds of fraud. Prior to recording his judgment lien, claimant admits

he filed a lawsuit against Marie Dalton based on the information obtained in the SEC 

action. (Doc. 82, Exhibit A, ¶¶ 8-9). The SEC Complaint specifically states that Richard 

Dalton and UCR were running a Ponzi scheme and the money obtained from the fraud 

was used to purchase defendant Cole Street, titled in Marie Dalton’s name. (Doc. 82, 

Exhibit D, ¶¶ 1, 34). Moreover, by his own admission, claimant Magnani was not only

aware of the criminal activity, but also the direct connection between the criminal acts 

and the defendant property prior to his judgment lien. (Doc. 82, Exhibit A ¶¶ 8-10). 

These facts are precisely what causes defendant Cole Street to be subject to forfeiture, 

and prevents claimant Magnani from arguing ignorance.3

 

 3 Claimant Magnani states that he did not actually receive the Verified Complaint until 

March 27, 2012. (Doc. 82, p. 7 ¶ 25). Although accurate, it would have been impossible 

for the government to send notice to a party prior to the party having any interest in the 

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2. Claimant Magnani Had Constructive Notice of the Civil 

Forfeiture Action Prior to His Property Interest 

Second, the multiple notices of lis pendens filed in the chain of title in Jefferson 

County, also prevent claimant from asserting that he lacked knowledge. A claimant 

may not avoid summary judgment when the lack of knowledge is “inconsistent with the 

uncontested facts.” United States v. 16328 South 43rd East Ave, 275 F.3d 1281, 1285 

(10th Cir. 2002) (citation and quotations omitted). Although claimant cites United States 

v. 2003 Lamborghini Murcielago, 6:07-cv-726, 2007 WL 4287674, at *6 (M.D. Fla. Dec. 

6, 2007), as support for his claim that there is no need to investigate whether the 

property was subject to forfeiture, the case is inapposite because by operation of law,

claimant Magnani was imputed with constructive knowledge. 

Indeed, by the time claimant had filed his judgment lien, it is undisputed that the 

government had recorded two notices of lis pendens on August 18, 2011 and December 

1, 2011, respectively. (Docs. 78, 82 ¶¶ 27,29). These notices gave claimant

constructive knowledge of the forfeiture, irrelevant of whether or not he chose to do a 

property title search. See Colo. Rev. Stat. Ann. § 38-35-110(1) (a lis pendens serves 

as notice); Colo. Rev. Stat. Ann. § 38-35-106(1) (“[a]ny written instrument . . . affecting 

title to real property . . . after being recorded . . . shall be notice to all person of classes 

of persons claiming any interest in said property”).

Clearly, “[l]is pendens filings are designed to provide notice to third parties that 

there is a suit involving the property subject to the lis pendens.” Hewitt v. Rice, 154 

 

defendant property. Here, the government ran a title search to determine who had a 

property interest in defendant Cole Street when it filed its Verified Complaint in August 

2011, and sent notice to all known interested parties. Claimant Magnani did not appear 

in the chain of title when this case was initiated, because he did not file his judgment 

lien until four months later. 

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P.3d 408, 412 (Colo. 2007). Otherwise, the “property which was the subject of litigation 

could be alienated, the court's exercise of jurisdiction would be frustrated and litigants 

would be forced into an unending series of lawsuits against persons acquiring the 

property during litigation.” Belleville State Bank v. Steele, 345 N.W. 2d 405, 409 (Wis. 

1984) (cited to in Kerns v. Kerns, 53 P.3d 1157, 1162 (Colo. 2002)). In fact, the 

Colorado statute mandates filing a notice of lis pendens if a party wants to preserve 

their interest against those that encumber the property while the action is pending. 

Kerns, 53 P.3d at 1161. Claimant Magnani’s argument that by merely not checking the 

chain of title, a junior lienholder could take priority over a senior interest, is nonsensical. 

Such a result would subvert the whole purpose of the recording act and cause endless 

litigation. 

Moreover, the courts consistently hold that a notice of lis pendens puts all future 

acquirers of property interests on notice that the property is subject to forfeiture under 

Section 983(d)(3)(A)(ii). See e.g. 392 Lexington Parkway South, 386 F. Supp. 2d at

1071 (a properly filed lis pendens gives constructive notice); accord United States v. 

One Residential Property Located at 8110 E. Mohave Road, 229 F. Supp. 2d 1046, 

1049 (S.D. Cal. 2002).

C. Claimant Magnani’s Property Interest is Subordinate to the 

Government’s

The claimant’s argument is also attempting to use the forfeiture statute to avoid 

his status as a junior interest. In addition to providing constructive notice to subsequent 

parties claiming property interests, the recording act also provides the framework for 

determining the priority of those property rights. Rancho Escondido Prop. Owners 

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Ass’n v. Redstone Mgmt. Co., 169 P.3d 270, 272 (Colo. App. 2007) (the “race-notice 

statute . . . accords priority to encumbrances in the order in which they were recorded). 

The government’s notices of lis pendens places them in a senior priority over 

claimant Magnani’s junior interest. It is undisputed that defendant Cole Street is 

forfeitable because it was purchased with fraud proceeds; thus, the government’s 

property interest vested on July 2, 2009, the date defendant Cole Street was purchased. 

18 U.S.C. 981(f); (Docs. 78, 82, ¶¶ 1-24). Further, the claimant is not an innocent 

owner under 18 U.S.C. 983(3)(A), as discussed infra. Therefore, according to the 

recording statutes, the government’s interest remains superior to claimant even though 

a forfeiture judgment has not been entered yet. See Kerns v. Kerns, 53 P.3d at 1161 (if 

a lis pendens is recorded first, all other encumbrances are bound by the outcome of the 

litigation). Therefore, because the defendant property is subject to forfeiture and 

claimant is not an innocent owner, claimant’s judgment lien interest remains subordinate 

to the government’s interest under the recording statutes.

D. Equity in Victim Cases

Lastly, claimant Magnani’s suggestion that he took affirmative steps and 

therefore, should be recognized as an innocent owner for equitable reasons, is at odds 

with the statutory purpose of forfeiture. If individual victims were able to take priority 

over the government, the government would not forfeit property and the process for

returning forfeited funds to all victims of crime would be wholly futile. See 18 U.S.C. § 

981(e)(6) (the Attorney General is authorized to retain forfeited property for the purpose 

of returning it to victims). Furthermore, the government is not attempting by this 

forfeiture action to extinguish claimant’s right to collect on his judgments in any other 

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matter permitted by law.4 The government is merely using the forfeiture process to 

obtain property purchased with fraudulently obtained proceeds and distribute them back 

to all of the victims of the Daltons’ fraud on a pro rata basis, as specifically recognized in 

the forfeiture statutes.

CONCLUSION

WHEREFORE, for all the reasons stated above, the government respectfully 

requests that the Court grant the government’s Motion for Summary Judgment, deny 

claimant Magnani’s affirmative innocent ownership defense, and forfeit defendant Cole 

Street to the United States. 

DATED this 2nd day of December, 2013.

Respectfully submitted,

ERIC H. HOLDER, JR.

ATTORNEY GENERAL OF THE UNITED STATES

&

BARRY R. GRISSOM, # 10866

UNITED STATES ATTORNEY

DISTRICT OF KANSAS

barry.grissom@usdoj.gov

By:

s/ Tonya S. Andrews

tonya.andrews@usdoj.gov

Special Attorney

1225 17th Street, Suite 700

Denver, CO 80202

Telephone: (303) 454-0210

 4 The government is unclear what the exact amount that claimant Magnani is claiming in 

this case. His judgment lien is recorded as $910,365.44, plus attorneys’ fees, costs, and 

post-judgment interest. (Doc. 82, p. 7 ¶ 23); see also (Doc. 47). However, he now 

argues that he is only seeking his investment amount. (Doc. 82, p. 18). 

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CERTIFICATE OF SERVICE

I hereby certify that on this 2nd day of December, 2013, I electronically filed the 

foregoing with the Clerk of Court using the ECF system which will send notice to all 

counsel of record.

s/ Tonya S. Andrews 

Special Attorney

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