Court Opinion

ID: 3000931
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:10:53.230144+00
Date Added: 2024-06-11T13:24:21.035991
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 06-2034
UNITED STATES OF AMERICA,
                                             Plaintiff-Appellee,
                               v.

FRANK KOLLINTZAS,
                                                      Defendant.
APPEAL OF:
   JOANNA KOLLINTZAS,
                                              Interested Person.
                         ____________
           Appeal from the United States District Court
    for the Northern District of Indiana, South Bend Division.
        No. 03 CR 91—Robert L. Miller, Jr., Chief Judge.
                         ____________
ARGUED NOVEMBER 27, 2006—DECIDED SEPTEMBER 5, 2007
                  ____________

 Before EASTERBROOK, Chief Judge, and ROVNER and
SYKES, Circuit Judges.
  SYKES, Circuit Judge. A jury found Frank Kollintzas
guilty of converting large sums of money from the City of
East Chicago, Indiana. After the trial Kollintzas disap-
peared. The district court sentenced him in absentia and
ordered that he pay over $25 million in restitution. The
government immediately initiated collection proceedings,
including garnishment, under the existing criminal docket
number. While the garnishment proceedings were pending,
2                                             No. 06-2034

Kollintzas’s wife, Joanna, filed for divorce in Indiana
state court. The government served her with notice of the
garnishments pursuant to the requirements of the Federal
Debt Collection Procedures Act (“FDCPA”), and she made
a general appearance in the district court. She subse-
quently filed a brief asserting an interest in the property
being garnished; she argued that her interest in the
marital assets was a matter for the state court, not the
federal court, to decide. The district court disagreed and
ultimately concluded Mrs. Kollintzas had failed to estab-
lish her property interest under Indiana law. The court
granted the government’s motion to release the funds for
garnishment, and Mrs. Kollintzas appealed. We affirm.

                    I. Background
  In November 2004 Frank Kollintzas was convicted by
a jury of converting money from the City of East Chicago,
Indiana, in violation of 18 U.S.C. § 666(a)(1). Sentencing
was scheduled for February 24, 2005, but he did not
appear. Chief Judge Robert Miller issued a bench warrant,
sentenced Kollintzas in absentia to a term of imprison-
ment, and ordered him to pay restitution of over $25
million pursuant to the Mandatory Victims Restitution
Act of 1996 (“MVRA”), 18 U.S.C. § 3663A. Kollintzas has
not been found.
  The government quickly initiated efforts to collect a
portion of the $25 million Kollintzas owes in restitution.
On March 1, 2005, the government filed a Notice of Lien in
Lake County, Indiana, where Kollintzas’s property is
located. The government also initiated garnishment
proceedings before Chief Judge Miller pursuant to the
FDCPA, 28 U.S.C. §§ 3001-3308, and served interrogato-
ries on third-party account holders (“the garnishee-defen-
dants”) to determine the amounts they were holding
and to verify the names on the accounts. Based on infor-
No. 06-2034                                               3

mation Kollintzas had provided during the presentence
investigation and the garnishee-defendants’ interrogatory
responses, the government decided to pursue the follow-
ing assets (“the Assets”), all held in the sole name of
Frank Kollintzas unless otherwise indicated:
    •   Northwestern Mutual Life Insurance tax-deferred
        annuity with a cash surrender value;
    •   School of East Chicago retirement package;
    •   Public Employees Retirement Fund account;
    •   Wachovia Securities account;
    •   Peoples Bank checking accounts owned by Frank
        and Joanna as joint tenants with rights of
        survivorship;
    •   Northwestern Mutual Life Insurance policies
        owned by Frank and with Frank listed as the
        person with the right to withdraw cash surrender
        values;
    •   Nationwide Retirement Solutions account;
    •   Tech Credit Union savings and checking accounts;
    •   Indiana Teachers Retirement Fund;
    •   Funds held by the City of East Chicago as a pen-
        sion package; and
    •   Sandridge Bank savings and checking accounts.
  On March 31, 2005—while the garnishment proceedings
were pending and after the government’s liens were
perfected—Kollintzas’s wife, Joanna, filed for divorce in
Indiana state court. The state court issued an ex parte
temporary restraining order prohibiting the garnishee-
defendants, who had been served with the garnishment
notice in Kollintzas’s federal criminal case, from transfer-
ring any funds from the Assets. The government then
4                                                     No. 06-2034

served Mrs. Kollintzas with notice of the garnishment
proceedings pursuant to the FDCPA, § 3202(c),1 so that
she could assert any claimed interest in the Assets.
  Mrs. Kollintzas made a general appearance in the
district court at a status conference, and at that time
the court set a briefing schedule to address the govern-
ment’s motion for release of the specified funds for gar-
nishment purposes. Mrs. Kollintzas then filed a brief
identifying herself as an “intervenor” and asserting an
interest in Frank’s property based on the fact that she
contributed income to the marriage. She did not, however,
specify the amount of her contribution to the Assets, nor
did she indicate why she was legally entitled to any of
the Assets under state law. Instead, she argued more
generally that the Assets were part of the “marital pot”
and that it was the “province of the state trial court to
determine what interest in marital property is held by
Frank Kollintzas and what interest in marital property
is held by Joanna Kollintzas.”
   The district court granted the government’s motion to
release funds. The court held that the government’s liens
relating to “all property and rights to property” of Frank
Kollintzas were superior to Mrs. Kollintzas’s claim to
marital property in the divorce proceedings because the
liens were perfected before she filed for divorce. Moreover,
the court rejected Mrs. Kollintzas’s generalized claim

1
    28 U.S.C. § 3202(c) states:
      (c) Service. A copy of the notice and a copy of the application
      for granting a remedy under this subchapter shall be served
      by counsel for the United States on the judgment debtor
      against whom such remedy is sought and on each person
      whom the United States, after diligent inquiry, has reason-
      able cause to believe has an interest in property to which the
      remedy is directed.
No. 06-2034                                                    5

regarding her contributions to the marriage as insufficient
to establish an interest in the Assets. Shortly after grant-
ing the government’s motion, the district court issued
final garnishment disposition orders for the Assets. Mrs.
Kollintzas appealed.2

                       II. Discussion
A. Mrs. Kollintzas’s status as an “interested person”
   under the FDCPA
  Throughout these proceedings Mrs. Kollintzas has
referred to herself as an “intervenor.” This is procedurally
incorrect. She never filed a motion to intervene, nor did
the district court ever recognize her as an intervening
party. The government initiated these FDCPA collection
proceedings under the existing docket number in Frank
Kollintzas’s criminal case, and Mrs. Kollintzas partici-
pated in the proceedings through counsel after being
served with the garnishment notice. We raised the ques-
tion of Mrs. Kollintzas’s status at oral argument, and
after argument ordered supplemental briefing on the
following questions: (1) whether intervention by a private
party is proper in a criminal case; and (2) whether there
is a basis for continuing jurisdiction in the district court
to make further rulings in the criminal case.
  There is no provision in the Federal Rules of Criminal
Procedure for intervention by a third party in a criminal
proceeding; intervention in civil proceedings is governed

2
  After Mrs. Kollintzas filed her notice of appeal, she moved the
district court to stay collection with respect to those assets
Mrs. Kollintzas claims an interest in. The district court denied
her motion but ordered the clerk of court to hold moneys col-
lected in connection with the garnishment proceedings pending
resolution of this appeal.
6                                               No. 06-2034

by Rule 24 of the Federal Rules of Civil Procedure, which
does not apply in a criminal case. Mrs. Kollintzas argues
that the FDCPA collection proceedings, although techni-
cally part of Frank Kollintzas’s criminal case, were civil
in nature and therefore she could have intervened as of
right pursuant to Rule 24. The government sidesteps the
question whether intervention is available in FDCPA
proceedings initiated in the context of a criminal case; it
takes the position that Mrs. Kollintzas is not an intervenor
at all but rather an “interested person” entitled to partici-
pate in the collection proceedings under the FDCPA in
order to assert an interest in the property subject to
garnishment.
  We need not decide whether intervention is ever appro-
priate in this situation; as we have noted, Mrs. Kollintzas
never sought to be recognized as an intervening party, a
step which can only be accomplished by motion. See FED.
R. CIV. P. 24(c) (“A person desiring to intervene shall serve
a motion to intervene upon the parties as provided in
Rule 5,” which “shall be accompanied by a pleading . . . .”).
Mrs. Kollintzas’s participation in the garnishment pro-
ceedings was as a person with an interest in property
subject to collection remedies under the FDCPA. That
statute is applicable to the enforcement of restitution
orders and requires the government to serve notice on
“each person whom the United States . . . has reasonable
cause to believe has an interest in property to which the
remedy is directed.” 28 U.S.C. § 3202(c).
  It has been established in this and other circuits that
district courts may entertain civil garnishment and other
collection proceedings as postjudgment remedies within
an underlying criminal case; nothing precludes the gov-
ernment from initiating a collection proceeding under an
existing criminal docket number in order to collect a fine
or restitution ordered as part of the criminal sentence.
United States v. Vitek Supply Corp., 151 F.3d 580, 585-86
No. 06-2034                                                  7

(7th Cir. 1998) (holding the government may proceed
against a corporate defendant’s alter egos as a post-
judgment remedy in a criminal case in order to collect on
restitution obligation of individual and corporate defen-
dants); United States v. Mays, 430 F.3d 963, 966 (9th Cir.
2005) (holding FDCPA procedures are available as
postjudgment remedies in criminal cases) (cert. denied, 126
S. Ct. 1416 (Feb. 21, 2006)); United States v. Timilty, 148
F.3d 1, 3 (1st Cir. 1998) (holding the government need not
reduce a restitution order to a civil judgment prior to
enforcing it; the government may proceed with collection
action within a criminal case); United States v. Thornton,
672 F.2d 101, 106 (D.C. Cir. 1982) (stating “[i]t is not
necessary [for the government] to start a new action, civil
or criminal,” to proceed with garnishment).
  The Ninth Circuit’s decision in Mays is instructive here.
In Mays, the district court entered a restitution order
against the defendant pursuant to the MVRA. The govern-
ment then initiated garnishment proceedings pursuant
to § 3205 of the FDCPA under the existing criminal docket
number. The Ninth Circuit held this scenario was plainly
contemplated by the MVRA based on the language of
18 U.S.C. § 3613(a), which specifies the civil remedies
available for the satisfaction of fines, and subsection (f ) of
that statute, which makes the same procedures ap-
plicable to the enforcement of orders of restitution. Mays,
430 F.3d at 965. More specifically, § 3613(a) provides:
“The United States may enforce a judgment imposing a
fine in accordance with the practices and procedures for
the enforcement of a civil judgment under Federal law or
State law.” Subsection (f ) of § 3613 provides that “all
provisions of this section are available to the United States
for the enforcement of an order of restitution.” The FDCPA
is a procedural vehicle available to the United States
under federal law for the enforcement of its civil judg-
ments; the Ninth Circuit held that by “importing the
8                                              No. 06-2034

FDCPA’s procedures into the MVRA, Congress clearly
meant to make those procedures available in criminal
cases.” Mays, 430 F.3d at 966.
  Accordingly, the government’s initiation of civil garnish-
ment proceedings within the criminal case was procedur-
ally appropriate under the MVRA and the FDCPA, and
there is no concern about the district court’s jurisdiction.
See Vitek, 151 F.3d at 586 (“The United States always
gets to litigate in its own courts. See 18 U.S.C. § 3231,
28 U.S.C. § 1345. Any effort to collect a debt due to the
United States presents a claim under federal law . . . .”).
And because the government specifically invoked the
remedial procedures of the FDCPA to collect restitution
in this case, Mrs. Kollintzas’s participation was not
improper, even though she was not a party.
  The FDCPA requires the government to use reasonable
diligence to identify and serve notice on any person who
may have an interest in the property it targets for col-
lection proceedings under the FDCPA. See 28 U.S.C.
§ 3202(c) (requiring the government to serve a “copy of
the notice and a copy of the application for granting a
remedy under this subchapter” on “each person whom the
United States, after diligent inquiry, has reasonable
cause to believe has an interest in the property to which
the remedy is directed.”). The FDCPA also provides that
the government may proceed against jointly owned prop-
erty to the extent permitted by state law. See 28 U.S.C.
§ 3010(a) (“The remedies available to the United States
under this chapter may be enforced against property
which is co-owned by a debtor and any other person only
to the extent allowed by the law of the State where the
property is located. . . .”). The FDCPA’s third-party notice
requirement and the provision regarding jointly owned
property together imply that nonparties with an interest
in the targeted property may participate in the collection
No. 06-2034                                                    9

proceedings for the purpose of asserting their interest
in the property.
  Thus, we agree with the government that Mrs.
Kollintzas’s participation in these proceedings was as
an “interested person” under the FDCPA and not an
intervenor.3 Because the district court’s order granting
the government’s motion to release the funds for garnish-
ment was a final decision as to her claim to the Assets,
we are satisfied that this appeal is properly before us.
United States v. Elliott, 149 F. App’x 489, 492 (7th Cir.
2005) (holding that preliminary forfeiture order, rather
than final forfeiture order, was final because it was
conclusive as to defendant’s interest in the property “and
thus was the final order in the matter as to him”); United
States v. Minneman, 6 F. App’x 422, 424 (7th Cir. 2001)
(holding “disposition order concludes the garnishment
proceedings and therefore that order, and not the order
denying the debtor’s objections, is the final order from
which a debtor should appeal”); Am. Oil Co. v. McMullin,
433 F.2d 1091, 1096 (10th Cir. 1970) (holding order
unrelated to principal lawsuit final and appealable be-
cause “if there were no appeal allowed at this time, there
may never be a timely appeal”); see also Cleveland Hair
Clinic, Inc. v. Puig, 106 F.3d 165, 167 (7th Cir. 1997)
(stating for nonparty found in contempt, adjudication in
contempt usually is the final decision in the case; “there
will never be another, more conclusive, order” for the
nonparty); Carter Prods., Inc. v. Eversharp, Inc., 360 F.2d
868, 871 (7th Cir. 1966) (holding order denying motion
to compel a nonparty witness to answer questions was
a final decision because it was final “for all practical
purposes”).

3
  We have revised the caption to reflect Mrs. Kollintzas’s status
in this case.
10                                                  No. 06-2034

B. Garnishment proceedings
  An order for payment of restitution becomes a lien on all
property and rights to property of the defendant upon
entry of judgment, see 18 U.S.C. § 3613(c), which in this
case was on February 24, 2005. The lien is subsequently
perfected when a notice of lien is filed, see § 3613(d); 26
U.S.C. § 6323(f ), which in this case was on March 1, 2005.
Liens to pay restitution debts are treated like tax liens, see
§ 3613(c); 26 U.S.C. § 6321 (discussing tax liens), so that
they are “effective against every interest in property
accorded a taxpayer by state law,” United States v.
Denlinger, 982 F.2d 233, 235 (7th Cir. 1992). “We look
initially to state law to determine what rights the tax-
payer [or in this case, the criminal defendant] has in the
property the Government seeks to reach, then to federal
law to determine whether the taxpayer’s state-delineated
rights qualify as ‘property’ or ‘rights to property’ within
the compass of the federal tax lien legislation.” Drye v.
United States, 528 U.S. 49, 58 (1999); United States v.
Nat’l Bank of Commerce, 472 U.S. 713, 727 (1985).
  In Indiana marital property is held as a tenancy by the
entireties, so that each spouse has an undivided interest
in the whole, provided title to the property is held by both
husband and wife.4 Denlinger, 982 F.2d at 236. Indiana

4
  In Indiana when property is divided in a divorce action, “[a]ll
property owned by either spouse before the marriage, acquired
by either spouse in his or her own right after the marriage
and before the final separation of the parties, or acquired by
the joint effort of the parties is included within the marital
estate.” Deckard v. Deckard, 841 N.E.2d 194, 200 (Ind. Ct. App.
2006) (citing IND. CODE § 31-15-7-4). Indiana courts presume
that an equal division of property is just; however, each party
has an opportunity to rebut this presumption by showing: the
contribution of each spouse to certain property; whether property
                                                    (continued...)
No. 06-2034                                                 11

law permits a husband to convey property he owns in his
own name without the consent of his wife—“an act which
extinguishes any right the wife may have in the property
by virtue of marriage.” Id.; IND. CODE § 29-1-2-3.1. Thus,
a tax lien can attach to property held in the husband’s
name when the wife’s name is not on the title. Denlinger,
982 F.2d at 235.
   Federal law determines whether the government’s
liens attach to the Assets. The primary consideration is
“the breadth of control” the taxpayer could exercise over
the property. Drye, 528 U.S. at 61 (quoting Morgan v.
Comm’r, 309 U.S. 78, 83 (1940)). For example, the Su-
preme Court has held the following constitute rights to
property: a taxpayer’s right under a life insurance policy
to compel his insurer to pay him the cash surrender value,
United States v. Bess, 357 U.S. 51 (1958); a taxpayer’s
right under state law to withdraw the whole of the pro-
ceeds from a joint bank account, Nat’l Bank of Commerce,
472 U.S. at 724-25; and a taxpayer’s right to receive the
entire value of an estate, even if he immediately elects to
pass that value on to someone else, Drye, 528 U.S. at 61.
  In this case, most of the Assets are in Frank Kollintzas’s
name alone. Only the Peoples Bank checking accounts
are held by Frank and Joanna jointly, and because Frank
had the right to withdraw all of the money at any time
without Joanna’s permission, the government’s lien
attached to the full value of the account. IND. CODE 32-17-
11-22(b) (“Any multiple party account may be paid, on
request, to any one (1) or more of the parties.”); see Nat’l
Bank of Commerce, 472 U.S. at 724-25.

4
   (...continued)
was acquired before the marriage, through inheritance, or as a
gift; the conduct of the parties during the marriage related to
property; and the economic circumstances of having custody
of children. IND. CODE § 31-15-7-5.
12                                              No. 06-2034

   After the government’s liens attached and after she
filed for divorce, Mrs. Kollintzas had an opportunity to
establish her claimed interest in the Assets in the garnish-
ment proceedings before the district court. The government
conceded in its brief in the district court that “Mrs.
Kollintzas may establish ownership of all or part of these
account funds in this action by producing evidence that
she has made contribution of the funds representing
these balances.” She did not attempt to do so, however.
Instead, she argued that the property sought by the
government was marital property and as such it was “the
province of the state trial court,” not the federal court, to
determine the extent of her interest in the Assets.
  But the government’s liens were perfected and the
garnishment proceedings commenced before Mrs.
Kollintzas filed for divorce; her opportunity to establish
her interest in the property sought to be garnished was
therefore in the district court. Her claim that she has a
presumptive right to half of the marital property in her
divorce action under Indiana law is subject to the gov-
ernment’s previously perfected liens, which encumber
the Assets to the extent they are part of the marital
estate. Mrs. Kollintzas asserted a generalized marital
property interest in the district court, but made no effort
to establish the amounts (if any) she contributed to the
various Assets subject to garnishment. Accordingly, the
district court properly concluded that Mrs. Kollintzas
failed to establish a claim to the Assets superior to that of
the government.
                                                 AFFIRMED.
No. 06-2034                                        13

A true Copy:
      Teste:

                   ________________________________
                   Clerk of the United States Court of
                     Appeals for the Seventh Circuit

               USCA-02-C-0072—9-5-07