United States District Court, D. Connecticut
ORDER GRANTING IN PART AND DENYING IN PART
GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT
Jeffrey Alker Meyer United States District Judge.
Government seeks forfeiture of life insurance proceeds that
it alleges are traceable to acts of money laundering and wire
fraud. Although I agree that the Government has established
grounds to forfeit at least some portion of these life
insurance proceeds, I conclude that genuine issues remain
concerning the extent to which any additional forfeiture is
warranted. Accordingly, I will grant in part and deny in part
the Government's motion for summary judgment.
E. Lee, Jr., was an investment advisor who stole much of his
client's money rather than investing it as he had
promised them. See United States v. $465, 789.31 Seized
From Term Life Ins., 150 F.Supp.3d 175, 176 (D. Conn.
2015). The FBI eventually caught on to him, and Lee pleaded
guilty before me in December 2014 to five counts of wire
fraud, in violation of 18 U.S.C. § 1343. See United
States v. Lee, 3:14cr201 (JAM). I sentenced him in March
2015 to 63 months in prison as well as to orders of criminal
forfeiture and restitution in the amount of $1, 150, 815.57.
then appealed his sentence, but he died from cancer during
the pendency of the appeal. By operation of law, Lee's
death while the appeal was still pending required the vacatur
of his conviction and the abatement of his orders of criminal
forfeiture and criminal restitution, all without prejudice to
the right of the Government to pursue civil forfeiture.
See United States v. Lee, 2017 WL 125012 (D. Conn.
Lee's conviction has been vacated, I do not rely on the
fact of his (now non-existent) conviction to conclude that
Lee engaged in wire fraud. Instead, the undisputed facts
agreed to by the parties are enough to conclude that Lee
committed wire fraud by taking money on false pretenses from
his investors and then using the money either for his own
personal expenses or to engage in Ponzi scheme payments to
other investors to attract new rounds of investment money.
See, e.g., Doc. #48-2 at 2-9 (¶¶ 7-34).
years before he began defrauding his clients, Lee bought a $1
million life insurance policy in April 2008. Lee's
spouse-claimant Cathy Lee-was designated as the sole
beneficiary under the policy. Lee paid monthly policy
premiums of $379.22 for seven years from April 2008 to April
2015 when he died. Doc. #48-2 at 2 (¶ 4), 14 (¶ 7),
21 (¶ 42).
these premiums were paid from the same personal bank account
at Citibank that Lee used beginning in December 2011 for his
investor fraud. From December 2011 to October 2013, the
Citibank account received $1, 081, 055.08 in fraud funds from
Lee's victims. Id. at 8 (¶
Lee recycled more than $1 million in payments from this
account to his victims from November 2011 to April 2014,
while drawing down more than $500, 000 from this account over
this same time period for personal expenditures. Id.
at 9 (¶ 34).
meantime, the Citibank account was also laden with a large
amount of legitimate funds. According to Lee (and not
contradicted by the Government), he deposited approximately
$2, 250, 000 in legitimate compensation from his employment
into the account from December 2007 to July 2013. Doc. #48-2
at 19 (¶ 31).
April 2014, Lee continued to pay premiums for the life
insurance from a new bank account at Wells Fargo until his
death in April 2015. Id. at 21 (¶¶ 40-42).
There is no evidence that the Wells Fargo bank account
received any funds relating to any criminal activity.
short, the undisputed factual record shows that Lee paid
monthly policy premiums over the course of seven years from
April 2008 to April 2015 for the life insurance policy. It
further shows that at least half of these premiums were paid
from the Citibank or Wells Fargo accounts at times that they
did not contain any tainted funds (April 2008 to
November 2011 and May 2014 to April 2015).
for those months where there were tainted investor funds in
the Citibank account (December 2011 to April 2014), the
Government's statement of material facts leaves it
unclear whether each one of the monthly policy premiums was
in fact financed by fraudulent funds rather than by
legitimate funds in the account. The Government's
statement of material facts identifies only five months where
the transactional sequence makes clear that Lee paid the
monthly premium from funds that had been fraudulently
acquired by Lee from his investors. See Doc. #48-2
at 4-5 (¶ 12) (December 2012); id. at 5 (¶
14) (May 2013); id. at 6 (¶ 16) (July 2013);
id. at 7 (¶ 19) (February 2013); id.
at 7 (¶ 21) (November 2013).
after Lee died and the life insurance proceeds were realized,
the Government seized the remaining life insurance proceeds
in the amount of $465, 789.31. The Government eventually
filed this civil forfeiture action against the proceeds in
September 2015. Now the Government moves for summary ...