Forfeiture – Due process – Constructive trust

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Where a third-party petition has been filed seeking the return of $1 million from a bank account that was the subject of a forfeiture proceeding in connection with a criminal prosecution, the petitioner is entitled to the return of the funds under 18 U.S.C. §1963 and 18 U.S.C. §982(a)(1).

“In the fall of 2018, John Wilson (‘Wilson’) transferred one million dollars into a Bank of America checking account in the name of ‘Key Worldwide Foundation’ after Defendant William Rick Singer (‘Singer’) told Wilson that he could help secure his children college admissions slots. … Unbeknownst to Wilson, Singer at the time was cooperating with agents in an investigation into alleged misconduct in connection with college admissions. … In March 2019, Singer pled guilty to racketeering and money laundering conspiracy offenses and other charges, … and in September 2019, the government sought forfeiture of Singer’s assets including all funds on deposit in Singer’s Key Worldwide Foundation account at Bank of America (‘BOA x0486 account’) to which Wilson had transferred one million dollars. … On February 5, 2020, this Court (Zobel, J.) entered a Final Order of Forfeiture against Singer, ordering the forfeiture of, among other assets, all funds on deposit in the BOA x0486 account …

“Meanwhile, in a separate criminal case, the government charged Wilson and others initially in March 2019 with mail fraud conspiracy. … By October 22, 2019, the government charged Wilson (and others) in a third superseding indictment and added forfeiture allegations of ‘any property’ tied to substantive charges of mail and wire fraud and federal programs bribery which specifically alleged Wilson’s transfers to the BOA x0486 account were criminal offenses. … A fourth superseding indictment, returned on January 14, 2020, added a filing false tax return charge against Wilson. … Wilson’s case proceeded to trial in September 2021, … resulting in convictions for the 2018 transfer of one million dollars to Singer, …; Wilson was sentenced on February 16, 2022. … Wilson appealed the convictions, and, in May 2023, the First Circuit vacated all convictions except the filing false tax return charge. …

“Now, in Singer’s criminal case, as an ancillary forfeiture proceeding, Wilson has filed a third-party petition for the return of the one million dollars. …

“Here, Wilson asserts that he had a property interest in the Funds after their transfer by constructive trust. …

“Wilson argues that a constructive trust is warranted on the theory that Singer’s false statements inducing Wilson’s transfer of the Funds to the BOA x0486 account were tantamount to fraud. …

“… As the government acknowledged at oral argument, … had the Funds been forfeited in Wilson’s criminal case, the government would have returned them to Wilson upon the vacatur of his convictions. That did not happen, here, because the government forfeited the Funds in Singer’s criminal case, even as it signaled the possible forfeiture of same to Wilson in his criminal case. Accordingly, to prevent unjust enrichment, the Court recognizes Wilson as the beneficiary of a constructive trust with respect to the Funds. …

“Accordingly, the Court recognizes that Wilson’s 2018 transfer of the Funds to Singer created a constructive trust and that Wilson has a cognizable interest in the Funds sufficient at least to challenge its forfeiture on due process grounds. …

“Wilson argues that he is entitled to the return of the Funds because his legal interest in the Funds is superior to Singer’s interest in same. …

“… Wilson has a ‘legal interest’ in the Funds under Massachusetts law by virtue of a constructive trust, for reasons already discussed above in the Court’s analysis of Wilson’s entitlement to due process. …

“It appears that the federal circuit courts to have considered the issue have held that the beneficiary of a constructive trust has standing to assert a legal interest in property in criminal forfeiture proceedings. …

“This general consensus reflects the view that, although a constructive trust is a remedial device, once declared, the beneficiary’s interest in the property is deemed retroactively to have existed at the moment the property was transferred, such that the beneficiary may assert a legal interest ‘at the time of the commission of the acts which gave rise to the forfeiture of the property.’ …

“Applying these principles, the Court holds that Wilson’s ownership interest in the Funds, which existed before the conspiracies that served as the basis of the forfeiture in Singer’s criminal case, … survived after the Funds were transferred to the BOA x0486 account on the basis of Singer’s fraud by operation of a constructive trust and, thus, constitutes a ‘legal interest’ sufficient to confer standing within the meaning of 18 U.S.C. §1963(1)(6)(A) and 21 U.S.C. §853(n)(6)(A).

“Proceeding to the merits of the petition (as this Court would have done if Wilson had sought the return of the Funds after his predicate convictions had been overturned and if the Funds had been forfeited in his own criminal case), Wilson is entitled to an amendment of the forfeiture order if his interest in the Funds is ‘superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property.’ … Here, the ‘defendant’ was Singer. … Since it was Singer who induced Wilson into transferring the Funds into the BOA x0486 account on the basis of false statements, Singer’s interest in the Funds either never obtained or reverted back to Wilson at the moment of the transfers by operation of a constructive trust; thus, Wilson has shown by a preponderance of the evidence that his interest is superior to Singer’s interest in same. …

“For the reasons stated, Wilson’s Rule 60(b) motion to reopen ancillary proceedings and amend the Preliminary Order of Forfeiture to exclude his interest in the Funds, D. 110, is allowed. …”

United States v. Singer (Lawyers Weekly No. 02-218-24) (41 pages) (Casper, J.) (Criminal No. 19-cr-10078-DJC) (April 19, 2024).

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