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USA v. Have Faith in Money: How Lien Holders Can Protect Their Interests in Property that is Subject to a Federal Civil Forfeiture Action

The former comptroller of the city of Dixon, Illinois, Rita A. Crundwell, was sentenced to 19 years and seven months in federal prison for stealing $53.7 million from the city over two decades. According to the FBI, it is believed to be the largest theft of public funds in Illinois history. Crundwell used the proceeds of her crime to finance her quarter horse business and life of luxury.

Shortly after her arrest on April 17, 2012, the United States filed a civil forfeiture case (12 C 50153, N.D. Ill.), in which the United States sought the forfeiture of assets that Crundwell had acquired with proceeds from her decades-long fraud scheme. The United States sought the forfeiture of this property under 18 U.S.C. § 981(a)(1)(C), as the property was alleged to be derived from proceeds traceable to violations of 18 U.S.C. § 1343 (the wire fraud statute).

The property targeted for forfeiture included approximately 400 quarter horses with names such as “Have Faith in Money,” “Fabulous Moxie”, “Can’t Escape That”, “Careful Who You Invite”, “The Ultimate Tool”, “Money is Hot” and “Ms. Classy Style”. These horses were located throughout the country, where they were being boarded and bred at a number of facilities. Innocent ranchers and veterinarians were owed substantial amounts of money relating to the care of these horses, which included costs related to expensive artificial insemination and embryo transfer services undertaken to produce the next generation of world class quarter horses.

When faced with a federal civil forfeiture action targeting these horses, and little prospect of ever getting paid by Crundwell for the services rendered, these ranchers and veterinarians were faced with a dilemma: was it best to simply hand over possession of these horses to the government and write off the hundreds of thousands owed, or intervene in the civil forfeiture action and assert a right to be paid by the government, once the horses were sold at auction?

The answer depended entirely upon the law of the state in which the horses were being cared for. By caring for Crundwell’s horses in Texas, the ranchers and veterinarians in the Lone Star State acquired enforceable liens upon those horses under Texas law. (See Chapter 70.003 of the Texas Property Code, titled “Stable Keeper’s, Garageman’s, Pasturer’s, and Cotton Ginner’s Liens” and Chapter 70.010, titled “Liens for Veterinary Care Charges for Large Animals.”). By caring for Crundwell’s horses in Wisconsin, the ranchers and veterinarians in the Dairy State acquired enforceable liens under Wisconsin law. (See Wisconsin Statute § 779.43, titled “Liens of keepers of hotels, livery stables, garages, marinas and pastures.”). However, ranchers and veterinarians in other states that lack similar statutory protections were left with little recourse in the face of the government’s forfeiture action.

Relying upon their statutory liens, the Texas and Wisconsin ranchers and veterinarians intervened in the civil forfeiture action under Federal Rule of Civil Procedure 24(a)(2) and Supplemental Federal Rule of Civil Procedure G(5)(a). The General Rules for Civil Forfeiture Proceedings provide that “[a]n innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute.” 18 U.S.C. § 983(d)(1). Based upon their role as “innocent owners” of interests in the Texas and Wisconsin horses, the Texas and Wisconsin ranchers and veterinarians moved for summary judgment in the civil forfeiture action, seeking a declaration of their protectable interests in the horses, and an order conditioning the transfer of the Horses to the U.S. Marshall’s custody upon an agreement that their liens would be fully satisfied.

The United States ultimately executed an agreed order to that effect, honoring intervenors’ liens and agreeing to satisfy those liens from the gross proceeds of the sale of the horses, prior to any other deductions or distributions.

The Texas and Wisconsin ranchers and veterinarians have since been paid on their liens, and the United States has recouped approximately $7.4 million from the auctions of approximately 400 quarter horses, vehicles, trailers, tack and a luxury motor home, with additional proceeds being raised by the auction of real property and jewelry (including a 10 karat gold Sponge Bob Square Pants pendant encrusted with 846 diamonds). “Ms. Classy Style”, indeed.