HLD, v. 31, n. 11 (November 2003)
Second Circuit Finds Government Entitled To Equitable Tolling
Of Forfeiture Statute
Plaintiffs Edward and Rosemary Weiss owned and operated BR
Ambulance Services, Inc. (BR). Pursuant to a government investigation that
revealed that between 1990 and 1994, BR improperly billed Medicare for services
that were never provided, Edward pled guilty to making false claims in
violation of 18 U.S.C. � 287. According to the government, Medicare fees paid
to BR totaled $21,510,922, of which approximately 87% were fraudulently
obtained. During the course of its business, BR deposited the fraudulently
obtained funds, along with its legitimate revenue, into its bank accounts. The
commingled funds from these accounts were then used to establish a pension plan
for certain BR employees. In 1998, BR was dissolved as a result of bankruptcy
proceedings and arrangements were made to terminate the pension plan. When the
pension plan's assets were converted to cash, $45,809.81 was distributed to
Edward, $546,477.73 was distributed to Rosemary, and the rest was distributed
to other employees. The government seized Rosemary's and Edward's Individual
Retirement Accounts (IRAs) in 1999, alleging that the funds therein were
derived from mail and/or wire fraud, which are predicate crimes to the money
laundering statute, and were therefore subject to forfeiture under 18 U.S.C. �
981 (a)(1). The district court dismissed the government's complaint, holding
that the action was governed by the one-year statute of limitations in � 984
and therefore the action was time-barred.
The Second Circuit reversed, holding that the district court
should have applied equitable tolling to the limitations period. The appeals
court first noted that "[e]quitable tolling . . . permits courts to extend a
statute of limitations on a case-by-case basis to prevent inequity," Chao v.
Russell P. Le Frois Builder, Inc., 291 F.3d 219 (2d Cir. 2002).
Under the Employee Retirement Income Security Act's (ERISA's)
anti-alienation provision, pension benefits or funds may not be "assigned or
alienated" while being held by the plan administrator, the court noted. Thus,
the government could not have made its forfeiture claim until the BR pension
funds were distributed to the beneficiaries. The appeals court found that "it
would be inequitable to bar the government from proceeding against the funds in
this suit simply because the claimants invested their ill-gotten gains in a
pension plan." The appeals court theorized that, "an enterprising wrongdoer
could invest his proceeds in a pension plan, thereby starting the statute of
limitations clock and ERISA would then safeguard the criminal proceeds until
the forfeiture statute of limitations had run."
Thus, the appeals court held that, assuming the government is
able to prove that BR's deposits into the plan constituted money laundering,
equitable tolling is "available and appropriate."
United States v. All Funds Distributed to or on Behalf of
Edward Weiss, No. 01-6232 (2d Cir. Sept. 17, 2003).