Court Opinion

ID: 46359
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:57:21+00
Date Added: 2024-06-11T09:37:55.243611
License: Public Domain

United States Court of Appeals
                                                        Fifth Circuit
                                                       F I L E D
                In the                                 October 31, 2006
United States Court of Appeals                      Charles R. Fulbruge III
        for the Fifth Circuit                               Clerk
            _______________

              m 05-31107
            _______________

                 IN RE:
    PHILLIPS AND HORNSBY LITIGATION.

 KAREN HORNSBY KIRKWOOD, ETC.; ET AL.,

                              Plaintiffs,

                VERSUS

         PAUL D. GLASS; ET AL.,

                              Defendants.

        ***************

                 IN RE:
         FRAUDULENT TRANSFER.

       UNITED STATES OF AMERICA,

                              Plaintiff-Appellee,

                VERSUS

         RYAN PHILLIPS; ET AL.,

                              Defendants,

  RYAN PHILLIPS AND GREGORY PHILLIPS,

                              Defendants-Appellants.
                                     _________________________

                             Appeal from the United States District Court
                                for the Middle District of Louisiana
                                         m 3:03-CV-3231
                               ______________________________

Before JONES, Chief Judge, SMITH and                      which was an amount roughly equal to the
  STEWART, Circuit Judges.                                remainder of his net worth.

JERRY E. SMITH, Circuit Judge:*                              On June 26, 1998, the probation officer
                                                          presented Phillips with the PSR, including in-
    Defendants appeal a summary judgment                  formation about what restitution he might be
voiding a transfer of property from Chaney                obligated to pay. Phillips objected to several
Phillips to his sons Gregory and Ryan. We                 aspects of the report, including the amount and
affirm.                                                   recipients of the possible restitution. The PSR
                                                          was duly amended on July 24 to include Phil-
                        I.                                lips’s objections.
   On April 21, 1998, Chaney Phillips was
convicted of, inter alia, mail fraud and money                On the morning of July 30, the day of Phil-
laundering in violation of 18 U.S.C. §§ 1341              lips’s scheduled sentencing, he executed an in-
and 1957, respectively. Before sentencing, a              ter vivos donation of his interest in the Horns-
probation officer met with him to determine               by succession to his sons. Later that day, he
the value of his financial assets for inclusion in        was sentenced to 97 months’ incarceration and
a presentence investigation report (“PSR”). In            $225,587.56 in restitution. At no time during
answer to a specific question about inherited             his sentencing hearing did he disclose the do-
property, Phillips disclosed that he had a five           nation he had made that morning.
percent interest in a succession from his friend
Stanley Hornsby but claimed the interest was                 Phillips appealed his convictions and initial
of small value and was entangled in litigation.           sentence. Certain of his convictions were va-
Based on these representations, the officer as-           cated, and on November 20, 2000, he was re-
sumed the interest was de minimis and did not             sentenced to pay $217,587.56 in restitution.
include it in the PSR. Actually, however,
months before Phillips’s conversation with the               When it discovered Phillips’s gift, the gov-
probation officer, the litigation had been com-           ernment brought this action, alleging that the
pleted, and Phillips had been awarded $32,600,            conveyance constituted a fraudulent transfer
                                                          under the Federal Debt Collection Practices
                                                          Act (“FDCPA”), 28 U.S.C. § 3302 et seq.,
   *
    Pursuant to 5TH CIR. R. 47.5, the court has de-       which permits the government to avoid “trans-
termined that this opinion should not be published        fer[s] or obligation[s] to the extent necessary
and is not precedent except under the limited cir-        to satisfy [a] debt to the United States.” 28
cumstances set forth in 5TH CIR. R. 47.5.4.

                                                      2
U.S.C. § 3306(a)(1).2 On October 31, 2003,                Scott, 678 F.2d 606, 612 (5th Cir. 1982)
the government moved for summaryjudgment,                 (stating that rule 901 error is subject to harm-
which was denied because the district court               less error analysis).
found that there was a genuine dispute of ma-
terial fact as to whether Phillips had trans-                We agree with the district court that defen-
ferred the property with fraudulent intent.               dants had ample opportunity to object to the
                                                          relevance and content of the PSR and failed to
    The government moved for reconsideration              do so. The government informed defendants
and submitted a redacted version of the PSR in            and the court that it intended to introduce the
support. Finding that the PSR demonstrated                redacted PSR, and it disclosed specifically
conclusively that Phillips had been informed of           which portions it intended to include.
the likelihood of restitution before the transfer,
the court granted summary judgment as to the                  Pursuant to Local Rule 7.5M, the court re-
claim of a fraudulent transfer in violation of 28         quired that any objections be filed within twen-
U.S.C. § 3304. Only Phillips’s sons appeal,               ty days of March 27, 2004. Defendants filed
contending that the PSR was improperly ad-                no objection until January 24, 2005; they sup-
mitted into evidence and that, even considering           ply no plausible reason why they could not
the PSR, a genuine dispute of material fact ex-           have objected to the relevance of or redactions
ists with regard to Phillips’s intent in making           to the PSR within the time allotted by the dis-
the transfer.                                             trict court. Accordingly, we affirm the finding
                                                          of waiver as to these issues.
                      II.
   The sons object to the relevance of and re-               We need not decide whether defendants
dactions to the PSR and to the authenticity of            waived their objection to the authenticity of
the document under Federal Rule of Evidence               the copy of the PSR that the government in-
901. We agree with the district court that de-            troduced or whether the admission of the PSR
fendants waived their objections to the rele-             was error under rule 901. That is because any
vance of the document and the redactions                  error was harmless. Phillips has actually seen
thereto; we review the district court’s applica-          the PSR and on appeal his sons raise no genu-
tion of rule 901 for abuse of discretion. See             ine issue of fact as to the authenticity of the
R.R. Mgmt. Co., L.L.C. v. CFS La. Midstream               document.
Co., 428 F.3d 214, 220 (5th Cir. 2005). We
will reverse only where we determine that an                  Thus, any error committed in admitting the
error was prejudicial. See United States v.               copy of the PSR without certification was
                                                          harmless. Likewise, defendants have supplied
                                                          no reason to believe that admitting copies in
   2                                                      lieu of the original was unfair; accordingly, we
     Private restitution orders may be recovered in
the same manner as the statute provides for
                                                          also reject their challenge based on Federal
“debt[s] to the United States.” See 18 U.S.C.             Rule of Evidence 1003.
§ 3664(m)(1)(A)(i)-(ii) (stating that the United
States is authorized to enforce victim restitution                             III.
orders by the same means as it recovers fines);              The Phillips sons contend that, even con-
United States v. Phillips, 303 F.3d 548, 550-51           sidering the PSR as properly admitted into
(5th Cir. 2002).

                                                      3
evidence, summary judgment is inappropriate                equivalent value for the transfer; (3) the trans-
because there is a genuine dispute as to Phil-             fer was made to “insiders”; (4) Phillips was in-
lips’s intent in making the transfer. We dis-              solvent at the time of the transfer; (5) he con-
agree. Analyzing a Texas statute that was, in              cealed the transfer by failing to disclose it at
all relevant respects, identical to the FDCPA,             his sentencing;4 and (6) he concealed his retire-
this court stated that “[i]ntent to defraud . . .          ment account with the Louisiana Tax Asses-
can be decided as a matter of law” where                   sors’ Office. See 28 U.S.C. § 3304(b)(2). In
numerous “badges of fraud”3 are present and                addition to these nonexclusive statutory fac-
the only evidence in support of the defendant’s            tors, Phillips mischaracterized his succession
theory is a series of conclusional, self-serving           interest when he met with the officer develop-
statements. BMG Music v. Martinez, 74 F.3d                 ing the PSR, describing it as speculative and of
87, 90-91 (5th Cir. 1996).                                 small value. He also failed to disclose at the
                                                           sentencing that he had executed a $100,000
   As in BMG Music, six of the eleven listed               second mortgage on his house only two days
badges of fraud are present: (1) The transfer              earlier.
occurred shortly before or after the debt was
incurred; (2) Phillips received no reasonably                 Although there are some differences be-
                                                           tween this case and BMG MusicSSfor exam-
                                                           ple, the defendant in BMG Music admitted that
   3
     The FDCPA states, in determining actual in-           he retained an interest in the transferred prop-
tent, that special consideration may be given to           erty, see BMG Music, 74 F.3d at 91 n.21,
certain “badges of fraud” such as whether                  these distinctions are insignificant to the out-
                                                           come of this case. The same number of badg-
   (A) the transfer or obligation was to an insider;
                                                           es of fraud are present, and the inference of
   (B) the debtor retained possession or control of
   the property transferred after the transfer;            fraud is similarly inescapable.
   (C) the transfer or obligation was disclosed or
   concealed; (D) before the transfer was made or             None of defendants’ self-serving statements
   obligation was incurred, the debtor had been            that Phillips lacked intent to defraud is enough
   sued or threatened with suit; (E) the transfer
   was of substantially all the debtor’s assets;
   (F) the debtor absconded; (G) the debtor re-
   moved or concealed assets; (H) the value of the
                                                              4
   consideration received by the debtor was rea-                 Defendants’ contention that Phillips disclosed
   sonably equivalent to the value of the asset            the transfer because he made the transaction public
   transferred or the amount of the obligation in-         under Louisiana law is without merit. The fact that
   curred; (I) the debtor was insolvent or became          Phillips recorded the transaction and thus publi-
   insolvent shortly after the transfer was made or        cized it to the minimum extent necessary to achieve
   the obligation was incurred; (J) the transfer           a valid transfer under Louisiana law is insufficient
   occurred shortly before or shortly after a sub-         to constitute “disclosure” under the statute where
   stantial debt was incurred; and (K) the debtor          he failed to inform the sentencing court, the United
   transferred the essential assets of the business        States, or even any of the persons to whom he
   to a lienor who transferred the assets to an in-        owed restitution. See, e.g., LSA-C.C. art. 2442
   sider of the debtor.                                    (stating that concealed transfers of property are
                                                           ineffective with respect to third parties such as
28 U.S.C. § 3304(b)(2).                                    creditors).

                                                       4
to overcome the objective evidence.5 It is im-
plausible that Phillips did not know the differ-
ence between a fine, which he had been in-
formed that he was unlikely to have to pay,
and restitution. It is scarcely credible that he
did not realize that he would likely be forced
to make some restitution. He had been shown
the PSR, he knew was likely to be ordered to
pay restitution, and he transferred his interest
in the Hornsby succession to his sons to avoid
forfeiting it to his likely creditors. The numer-
ous indicia of fraudulent intent make summary
judgment appropriate.

   AFFIRMED.

   5
     See In re Hinsley, 201 F.3d 638, 643 (5th Cir.
2000) (“A party’s self-serving and unsupported
claim that [he] lacked the requisite intent is not
sufficient to defeat summary judgment where the
evidence otherwise supports a finding of fraud.”).

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