North Carolina Lawyers Weekly
A lawyer charged with helping his wife plunder money from the campaign chest of a Virginia state senator and two other organizations cannot shield his two homes from possible forfeiture, a federal appeals court ruled last month.
The 4th U.S. Circuit Court of Appeals said the properties are forfeitable because there is probable cause that attorney David H. Miller of Fairfax, Virginia, made mortgage and tax payments on the properties using money fraudulently obtained and laundered. Miller is charged with helping to embezzle more than $650,000 from the campaign of Sen. Dick Saslaw. In total, prosecutors contend Miller was involved in thefts of $1.4 million from the campaign, from his employer and from a charity he co-founded.
Miller’s wife, Linda Wallis, is serving a nearly five-year prison term after a 2016 guilty plea in the three fraud schemes.
Property seized before trial
Miller served as general counsel and chief compliance officer at SkyLink Air and Logistic Support Inc. in Sterling, Virginia, and Wallis was treasurer of the Saslaw campaign. Together, the couple launched a charity to support colleges serving students with autism and intellectual disabilities.
The government contends Miller used names of nonexistent law firms to bill SkyLink for work that was never done. Miller and Wallis reportedly transferred that money, and money taken from the campaign and the charity, into bank accounts the couple controlled.
As part of its case against Wallis, the government obtained a consent order for the forfeiture of Miller’s homes in Fairfax and Bethany Beach, Delaware. Miller objected that the properties belonged to him, not Wallis, and should not be subject to seizure as part of her case.
At a hearing before U.S. District Judge T.S. Ellis III, an FBI accountant testified that the fraudulently obtained money was used in part to pay interest on a balloon mortgage payment on the Fairfax property and for improvements on the Delaware property.
When prosecutors charged Miller with fraud, identity theft and money laundering, the indictment included civil and criminal forfeiture charges seeking the Delaware property and proceeds from the Fairfax home. Miller protested that he needed the assets to retain counsel of his choice.
Ellis agreed with prosecutors that the property is subject to forfeiture, and the 4th Circuit affirmed that ruling.
Forfeiture supported
The government can seize assets subject to forfeiture pending a criminal trial even if a defendant needs the assets to hire a lawyer, the 4th Circuit said, but has to show probable cause that the assets have a substantial connection to the purported crime.
Under two federal statutes, assets are subject to forfeiture if they are “traceable” to fraud or “involved in” money laundering. The government can take all of the property linked to money laundering, even if legitimate funds also were invested in the property, the court said.
The 4th Circuit has not expressly defined the requisite nexus for finding that real property is “involved in” money laundering, but the statute explicitly provides for forfeiture of actual proceeds of laundering, the panel said.
Because probable cause supported a finding that Miller involved the two properties in money laundering by spending laundered funds to improve and retain them, the appeals court approved the “involved in” basis for pre-trial restraint.
Ellis correctly determined that using laundered funds to finance improvements to the two Miller properties converted the money into an increase in the equity value of the properties, the court said.
“Although Miller places considerable weight on the fact that his properties were not purchased with laundered funds, the statutory test does not require so much. It requires only that property be ‘involved in’ money laundering transactions,” Judge Allyson K. Duncan wrote for the panel.
Miller failed to persuade the judges that any government interest should be limited to the amount of tainted money he spent to improve them. A property involved in a money laundering offense is forfeitable in its entirety, the court said.
Miller also attacked the “traceable” conclusion of the district court, saying the FBI accountant erred in her analysis and that interest payments on a mortgage are not traceable to equity in the property.
The accountant did not err, the appeals court said. She used the lowest intermediate balance rule to trace fraudulent proceeds to $286,559.83 in mortgage payments on the Fairfax property. When added to traceable proceeds spent on improvements and property taxes, the traceable funds exceeded Miller’s equity proceeds from the property’s sale, supporting restraint of the entire sum, the court said.
Payments on the mortgage directly increased Miller’s equity in the Fairfax property whether they went towards interest or principal on the note, and fraud proceeds were therefore traceable to the equity interest, the court said.
William R. Cowden of Washington represented Miller on appeal. Cowden was not available for comment. Assistant U.S. Attorney Gordon D. Kromberg represented the government on appeal.
The 12-page decision is U.S. v. Miller. (Lawyers Weekly No. 001-178-18.) The full text of the opinion is available online at sclawyersweekly.com.
