Opinion ID: 2798222
Heading Depth: 2
Heading Rank: 2

Heading: Pretrial Restraint of Seized Funds

Text: On January 10, 2011, Watts, represented by D&B, filed a motion seeking release of the seized funds for use in paying his legal fees during the criminal prosecution. After initially denying Watts a hearing, the district court directed then‐Magistrate Judge Joan M. Azrack to conduct a hearing pursuant to United States v. Monsanto, 924 F.2d 1186 (2d Cir. 1991), on the limited issue of the forfeitability of USW’s four accounts at JP Morgan Chase. On July 27, 2011, the district court adopted in part and modified in part Judge Azrack’s Report and Recommendation. While finding that the government had demonstrated probable cause to restrain $350,290.87 of USW’s funds in the JP Morgan Chase accounts as traceable to the proceeds of the charged offense, it found that the government had failed to demonstrate probable cause to restrain the remaining $633,499.24 (the “contested funds”). The district court consequently ordered the government to “release the remaining funds to [USW] promptly.” App’x at 128. After the government requested a stay of the order the following day, the district court entered a 30‐day stay on August 2, 2011. On August 11, 2011, USW, acting through Dupree’s “Attorney in Fact,” executed an assignment (the “Assignment”) of all its interests in the contested 8 funds to D&B. In relevant part, the Assignment stated: In payment of invoices . . . for past legal services and for future legal services that Assignee has provided or will provide to Rodney Watts, Jr. . . . , and in partial satisfaction of the obligation of the Assignor . . . to advance funds for Mr. Watts’ defense, all deemed good and valuable consideration received, Assignor hereby unconditionally and irrevocably assigns, grants, and transfers all rights, title, interest, and obligation in, to and under . . . [a]ll funds in the Assignor’s bank accounts . . . at JPMorgan Chase Bank . . . . The Assignor warrants and represents that the aforementioned rights, title, interest and benefits are free from all liens and encumbrances, except to the extent that the United States seeks forfeiture. App’x at 152. That same day, the government filed a motion seeking reconsideration and clarification of the district court’s July 27, 2011 order. In addition to requesting a reappraisal of the district court’s probable cause determination, the government sought clarification as to whether it should release the contested $633,499.24 to Watts or to Amalgamated, in light of Amalgamated’s preexisting lien on all of GDC’s accounts. At a hearing held on September 13, 2011, the district court denied the request to revisit its probable cause determination. It further declined to resolve D&B’s and Amalgamated’s competing claims to the property, and instead directed the government to deposit the $633,499.24 in the Seized Asset Deposit 9 Fund at the Eastern District of New York pending further orders from a court with jurisdiction over the dispute. Watts appealed the district court’s refusal to release the contested funds, and the district court stayed his criminal case pending appellate review. In the meantime, the criminal charges against Dupree and Foley proceeded to a jury trial in early December 2011. On December 30, 2011, the jury convicted Dupree of bank fraud, conspiracy to commit bank fraud, and two counts of making false statements under 18 U.S.C. § 1014. It acquitted Foley of all charges. On January 3, 2012, the same jury returned a Special Verdict finding that Dupree had obtained funds constituting or derived from the proceeds traceable to his offenses in the amount of $18,157,000, and that the funds in the eight bank accounts seized by government, including USW’s four accounts at JP Morgan Chase, were all subject to forfeiture as assets derived from proceeds traceable to those offenses. The district court entered a preliminary order of forfeiture as to all the funds seized from the eight accounts. On April 30, 2012, in an unpublished summary order, a panel of this Court held that the district court’s preliminary order of forfeiture following Dupree’s conviction mooted Watts’s appeal of the district court’s September 2011 orders 10 regarding release of the contested funds. Emphasizing that the “district court’s finding that the government lacked probable cause to continue to restrain the funds [at the Monsanto hearing] . . . did not bar the government from seeking the forfeiture of the funds following a trial,” the panel concluded that any remaining claims Watts might have to the contested $633,499.24 should be adjudicated through a post‐trial ancillary hearing. United States v. Watts, 477 F. App’x 816, 817 (2d Cir. 2012).