United States District Court, W.D. Oklahoma
L. RUSSELL UNITED STATES DISTRICT JUDGE.
criminal forfeiture matter stemming from Defendant Deborah
Gray's pleading guilty to healthcare fraud. The United
States (“the Government”) now seeks a final order
of forfeiture of the house she holds in joint tenancy with
her husband, Keith Gray. Arguing that the Government has
inappropriately forfeited his interest in the residence and a
shared bank account, Mr. Gray asks the Court to set a hearing
to adjudicate his rights in the property. Doc. 56. In
response, the Government moves to dismiss his Petition, Doc.
61, and requests that the Court enter an order for an
interlocutory sale of the property. Doc. 62.
Mr. Gray alleges that he paid value for the house without
knowledge of his wife's crimes, the Court GRANTS his
motion for a hearing. Doc. 56. The Government's Motion to
Dismiss is therefore DENIED. Doc. 61. The Government's
motion for an interlocutory sale is also DENIED. Doc. 62.
Keith Gray and his wife, Defendant Deborah Gray, purchased a
home together (“the Gray marital residence”) in
Oklahoma City in March 2013. Doc. 56, Ex. 1. At that time,
Mr. Gray was allegedly unaware that his wife and son had been
perpetrating healthcare fraud upon the federal government
since October 2011. Indeed, according to Mr. Gray he remained
oblivious to these crimes until July 6, 2016, when a federal
grand jury sitting in the Western District of Oklahoma
returned a 151-count indictment against his wife and their
son. The indictment described in detail how from October 2011
through May 2014 the pair submitted false and fraudulent
Medicaid claims through their employer to the Oklahoma
Healthcare Authority. Doc. 1, at 8, 11, and 15. The
indictment also sought forfeiture of any property
constituting or derived from proceeds of the offenses. Doc.
1, at 20 - 21. Guilty pleas from both soon followed,
including his wife's on January 4, 2017, in which she
agreed to forfeit all her right, title, and interest in
assets subject to forfeiture under federal law. These assets
included three bank accounts and the Gray marital residence,
all of which she admitted were proceeds or instrumentalities
of her crimes. Doc. 45, at 4.
Mr. Gray's Third-Party Petition
Overview of Criminal Forfeiture and Ancillary
982 of Title 18 of the United States Code prescribes
different forfeiture penalties for different categories of
federal crimes. See 18 U.S.C. § 982(a).
Assuming that an applicable federal statute calls for the
forfeiture of a defendant's property, the Court will
enter an order to that effect. Fed.R.Crim.P. 32.2(b). It does
so only after the defendant has been found guilty and the
Court has determined there is an established nexus between
the defendant's crimes and the property. Fed.R.Crim.P.
32.2(b)(1)(A). Importantly, the Court “enter[s] the
order without regard to any third party's interest in the
property.” Id. Once the Court has entered the
order, any third party claiming a legal interest in the
forfeited property can petition the court for a hearing at
which the party must establish his legal interest by a
preponderance of the evidence. 18 U.S.C. § 853(n)(6).
Assuming he carries this burden, the Court will amend its
earlier order of forfeiture to preserve the petitioner's
interest in the property. And while Federal Rule of Criminal
Procedure 32.2(c)(1) mandates that the court must conduct
this ancillary proceeding if the third party files a
petition,  the Rule also clarifies that before the
formal hearing, the “court may, on motion, dismiss the
petition for lack of standing, for failure to state a claim,
or for any other lawful reason.” Fed.R.Crim.P.
32.2(c)(1)(A). This motion is simply treated like a motion to
dismiss a civil complaint under Federal Rule of Civil
Procedure 12(b). See, e.g., Pacheco v. Serendensky,
393 F.3d 348, 352 (2d Cir. 2004). So as with Rule 12(b), the
Court must assume that all “allegations in the
complaint are true (even if doubtful in fact).”
Bell Atlantic Corp v. Twombly, 550 U.S. 544, 555
Deborah Gray is subject to mandatory forfeiture due to her
conviction for healthcare fraud. 18 U.S.C. § 982(a)(7).
After this Court found the requisite nexus between her
property and her crimes, it entered its Preliminary Order of
Forfeiture pursuant to Federal Rule of Criminal Procedure
32.2(b). After the Government, in accordance with 18 U.S.C.
§ 853(n)(1), provided notice to Mr. Gray as a
potentially interested party, Mr. Gray petitioned this Court
for a hearing to adjudicate his interests in the Tinker
Account and the Gray marital residence. While the Government
does not contest his claim to certain monies in the Tinker
Account, it does dispute that he has a legal interest in the
Gray marital residence. It argues, first, that Mr. Gray lacks
a legal interest to raise a claim in this ancillary
proceeding, and, second, even if Mr. Gray has a legal
interest in the Gray marital residence, it is not sufficient
to prevail under § 853(n).
Standing in an Ancillary Proceeding
party petitioning for a hearing under § 853(n) must
first demonstrate both constitutional and statutory standing.
As for constitutional standing, “a party seeking to
challenge a forfeiture of property must first demonstrate an
ownership or possessory interest in the seized property in
order to have standing to contest the forfeiture.”
United States v. Timley, 507 F.3d 1125, 1129 (8th
Cir. 2007). At least in regards to this question, the Court
is at a loss to see how the seizure of the home in which Mr.
Gray lives is not sufficient to confer constitutional
standing on him.
standing is a different matter. § 853(n)(2) requires a
third party claimant have a legal interest-as opposed to an
equitable interest-to petition the court. Id. State
law, rather than federal, decides whether this legal interest
exists. Willis Mgmt. (Vermont), Ltd. V. United
States, 652 F.3d 236, 242 (2d Cir. 2011). If state law
affords the petitioner no valid interest in the forfeited
property, “the inquiry ends and the claim fails for
lack of standing.” Timley, 507 F.3d at 1130
(8th Cir. 2007). In contrast, where the petitioner does hold
a legal interest under state law, federal law then determines
the consequences of that interest-i.e., whether the interest
is sufficient to prevail on the merits under §
853(n)(6). United States v. BCCI Holdings (Luxembourg),
S.A., 961 F.Supp. 287, 293 (D.D.C. 1997).
Mr. Gray undoubtedly holds a legal interest in the Gray
marital residence. In the eyes of Oklahoma, he and his wife
are joint tenants of the Gray marital residence. Because Mr.
Gray “has an interest in the property under the law of
the jurisdiction that created the property right, ” the
question becomes the consequence of that interest. In other
words, the court must look ...