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Second Circuit Finds Government Entitled To Equitable Tolling Of Forfeiture Statute

 
 

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).

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