United States v. Bryan Coffman

NOT RECOMMENDED FOR PUBLICATION
File Name: 15a0353n.06

Nos. 14-5134/14-5298 FILED
May 11, 2015
DEBORAH S. HUNT, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
)
v. )
)
BRYAN COFFMAN, )
ON APPEAL FROM THE
)
UNITED STATES DISTRICT
Defendant, )
COURT FOR THE EASTERN
)
DISTRICT OF KENTUCKY
)
BANIEL, LLC; DACORTA, LLC; MEGAN )
COFFMAN, )
)
Defendants-Appellants. )

BEFORE: GUY, BATCHELDER, and MOORE, Circuit Judges

ALICE M. BATCHELDER, Circuit Judge. In 2011, a jury convicted Bryan Coffman

of various counts of fraud and money laundering. The same jury acquitted his wife, Megan

Coffman, of several counts of money laundering. During the investigation leading up to trial, the

government sought to divest Bryan of the proceeds of his money-laundering scheme as well as

other assets used to shield the money laundering. Following the guilty verdict, the district court

issued a preliminary order of forfeiture that included property to which Megan Coffman and two

of her LLCs, the appellants in this case, lay claim. Pursuant to 21 U.S.C. § 853(n), Appellants

petitioned the district court for an ancillary hearing, which the district court duly held. Although
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the district court ruled in Appellants’ favor on a few issues, it included in the final order of

forfeiture against Bryan the vast majority of what Appellants claim is their property. Appellants

now challenge the final order of forfeiture. For the reasons that follow, we AFFIRM the order.

I.

We discussed at length the underlying case against Bryan Coffman and his business

partner, Gary Milby, in our disposition of Bryan’s appeal of his conviction. See United States v.

Coffman, 574 F. App’x 541 (6th Cir. 2014). To summarize, during a five-year period beginning

in 2004, Bryan and Milby defrauded almost 600 investors out of over thirty-six million dollars

through a complex scheme involving shell companies and securities in Kentucky oil wells.

Bryan and Milby used forty-two bank accounts in perpetrating the fraud. Bryan also funneled

investors’ money through several bank accounts into an investment account he held with his wife

Megan, and he later transferred his interest in the investment account to Megan. He further

funneled that money into Megan’s companies’ accounts, and purchased with it a condominium

where his sister-in-law lived, and a yacht which became the property of one of Megan’s

companies.

Pursuant to a Securities and Exchange Commission investigation, Bryan received a

subpoena for his bank account and other financial records in June 2008. Meanwhile, the federal

government continued its investigation of Bryan, Milby, and Megan. In December 2008, the

government filed a complaint for civil forfeiture in rem against the Coffmans and Milby pursuant

to 18 U.S.C. § 981(a)(1)(A) and (C) and 18 U.S.C. §§ 983 and 985, designating for forfeiture the

funds in thirteen bank accounts, one yacht, one condominium, and the Coffman family home.

The government then petitioned for, and the district court granted, a stay in the civil case pending

any criminal action. In 2009, a federal grand jury indicted Bryan and Milby for mail fraud, wire

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fraud, securities fraud, and money laundering, and also indicted Megan for money laundering.

As part of the indictment, the government sought through criminal forfeiture from Bryan under

18 U.S.C. § 981(a)(1)(C) a total of approximately thirty-three million dollars, designating the

funds in the thirteen bank accounts, the yacht, the condominium, and the Coffman family home

as potentially forfeitable, and nine pieces of real property as potential substitute assets if the

other property did not satisfy the thirty-three million dollar sum. In a separate forfeiture

allegation in the indictment that named both Bryan and Megan, the government sought forfeiture

of “any property, real or personal, which constitutes or is derived from proceeds traceable to the

commission of the offense, including but not limited to the specific property (financial institution

accounts, real property) as referenced above.” The case then proceeded to trial.

In 2011, the federal jury found Bryan and Milby guilty of almost all the counts against

them. The same jury acquitted Megan of the money laundering charges against her. Because the

parties elected to have the district judge determine the forfeiture issue rather than submit it to the

jury, the district court consolidated the criminal action and the civil forfeiture action, noting that

the final order of forfeiture in the criminal action would dispose of the civil action as well. On

April 19, 2012, the district court entered a joint-and-several judgment against Bryan and Milby

for thirty-three million dollars, which represented the approximate amount of proceeds derived

from their scheme. Pursuant to that judgment, the district court adopted a preliminary order of

forfeiture of the funds in the thirteen bank accounts, the condominium, and the yacht. Because

the monetary value of the property in the preliminary order totaled only about three million

dollars, the government petitioned the district court to amend its preliminary order and add to

that order two automobiles and eight pieces of real property as substitute property. Over Bryan’s

objections, the district court granted the government’s motion and included in its last preliminary

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order of forfeiture the funds in the thirteen bank accounts, the condominium, the yacht, the two

automobiles, and the eight pieces of real property.

Megan Coffman and two companies of which she is sole proprietor filed petitions for

ancillary hearings under 21 U.S.C. § 853(n) in order to assert their interests in some of the

forfeited property. Megan claimed ownership of the eight pieces of real property and at least

part of the funds in nine of the bank accounts; Dacorta LLC (“Dacorta”) claimed ownership of at

least part of the funds in two of the bank accounts; and Baniel, LLC (“Baniel”) claimed

ownership of the yacht. In March 2013, the district court held a two-day ancillary proceeding to

determine whether Megan or the two companies had a superior interest to that of the government

in any of the property. In January 2014, the district court released an opinion, determining that

Megan had proven a superior right to approximately $300,000 and her interest in the joint

tenancies that held the eight pieces of real property. Pursuant to this opinion, the district court

included in its final order of forfeiture most of the funds in the thirteen bank accounts, the yacht,

the two automobiles, and Bryan’s interest in the eight pieces of real property. Because of the

consolidation of the cases, the final order of forfeiture in the criminal case served as the final

order of forfeiture in the civil case as well.

Megan and her two companies appeal the final order of forfeiture in both the criminal

action and the civil action. We have consolidated the criminal case and the civil case for

purposes of appeal.

II.

Before we begin, some background on the criminal forfeiture procedures, specifically in

this particular context, will be helpful. The government sought forfeiture of the bank account

funds and the yacht under both 18 U.S.C. § 981 (“civil forfeiture”) and 18 U.S.C. § 982

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(“criminal forfeiture”) because civil forfeiture provisions are fully applicable in the criminal

forfeiture context. See 21 U.S.C. § 853(j).1 First, 18 U.S.C. § 981(a)(1)(C) authorizes the

forfeiture of any property “which constitutes or is derived from proceeds traceable to . . . any

offense constituting ‘specified unlawful activity’” as defined in 18 U.S.C. § 1956(c)(7). Mail

and wire fraud are “specified unlawful activities.” See 18 U.S.C. § 1956(c)(7)(A) (designating as

a “specified unlawful activity” any act constituting an offense “listed in section 1961(1) of this

title”); id. § 1961(1) (listing mail fraud and wire fraud). Thus, any proceeds of the fraud are

forfeitable. Second, 18 U.S.C. § 982(a)(1) further authorizes the forfeiture of any property

“involved in” or “traceable to” the underlying criminal prosecution. The crux of the

government’s forfeiture argument is that any money directly traceable to investors is forfeitable

as proceeds of the fraud. The remaining money in the bank accounts, and the yacht if purchased

with this remaining money, are forfeitable as property “involved in” the money laundering.

Because the district court entered a judgment for thirty-three million dollars but only

three million of it could be found, the government was entitled to petition the court for the

inclusion of substitute property. 21 U.S.C. § 853(p). Once the district court identified the

property the government sought, it submitted a preliminary order of forfeiture listing the property

subject to forfeiture, “without regard to any third party’s interest in the property.” Fed. R. Crim.

P. 32.2(b)(2)(A). Following entry of the preliminary order of forfeiture, the government

published the required notice of the order in order to determine whether there were any third-

party claims to the proposed forfeitable property. 21 U.S.C. § 853(n)(1). Any third party may

petition the court for a hearing to adjudicate the validity of his alleged interest in the property.

Id. § 853(n)(2). If the court determines at the hearing that the petitioner has established his

1
According to 18 U.S.C. § 982(b)(1), the Comprehensive Drug Abuse Prevention and Control Act of 1970 (21
U.S.C. § 853) governs this proceeding. Federal Rule of Criminal Procedure 32.2 also applies, because it contains
provisions for ancillary proceedings “prescribed by statute.” Fed. R. Crim. P. 32.2(c)(1).

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interest, by showing either a superior interest in the property or that he was a bona fide purchaser

of the property, the court must amend its order of forfeiture in accordance with that

determination. Id. § 853(n)(6). Regardless of the outcome of the ancillary proceeding, “[w]hen

the ancillary proceeding ends, the court must enter a final order of forfeiture.” Fed. R. Crim. P.

32.2(c)(2). It is this final order of forfeiture that Megan, Baniel, and Dacorta are appealing.

With this background in mind, our first task is to determine which of Appellants’

challenges are properly before us. Appellants’ entire first assignment of error, and several

portions of their other assignments of error, are direct challenges to the preliminary order of

forfeiture, claiming that the district court erred by designating certain property as forfeitable in

the first instance. Recently, however, we held that third parties lack standing to challenge the

preliminary order of forfeiture because “[b]y its plain terms . . . § 853(n) does not permit

‘relitigation’ of the district court’s antecedent determination that an item of property is subject to

forfeiture.” United States v. Fabian, 764 F.3d 636, 638 (6th Cir. 2014). Instead, § 853(n)

“allows a third party to obtain relief on only two grounds: first, that its interest in forfeitable

property ‘was superior’ to the defendant’s interest in the property ‘at the time of the commission

of the acts which give rise to the forfeiture’; or second, that the third party was a ‘bona fide

purchaser for value[.]’” Id. Appellants have made several claims that comport with § 853(n),

and those claims are properly before us. To the extent that they are challenging the district

court’s decision to include in the preliminary order of forfeiture certain property to which they

lay claim, however, they lack standing. See id. (“Thus, like every circuit to have reached the

issue, we hold that third parties lack statutory standing to challenge a district court’s

determination, in a preliminary order entered under Criminal Rule 32.2(b)(2), that certain

property is subject to forfeiture.”).

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But, Appellants contend, someone must be able to contest the basis for the initial

forfeiture of the property. This is true. Bryan was able; and he did. During the preliminary

order phase, the government must establish “the requisite nexus between the property and the

offense.” Fed. R. Crim. P. 32.2(b)(1)(A). The district court determined that the government met

its burden as to the funds in the thirteen bank accounts, the yacht, the condominium, the two

automobiles, and the eight pieces of real property. Bryan challenged this determination, and we

upheld it on appeal. See Coffman, 574 F. App’x at 561–64. We fully considered all of his

arguments about the preliminary order of forfeiture, except one. We refused to entertain any

argument on Appellants’ behalf, stating that he “cannot assert a third party’s interest in substitute

property in a direct challenge to a preliminary forfeiture order.” Id. at 563. We did this because

an ancillary proceeding under § 853(n) is “the sole avenue for a third party to assert an interest in

forfeitable property.” United States v. Erpenbeck, 682 F.3d 472, 480 (6th Cir. 2012) (emphasis

omitted). This is not a “shell game,” see United States v. Liquidators of European Fed. Credit

Bank, 630 F.3d 1139, 1148 (9th Cir. 2011), as Appellants contend. Rather, Bryan had a full and

fair opportunity to litigate the basis for the initial forfeiture, save that he could not raise third-

party interests. Appellants now have the chance to raise those third-party interests. In fact, in an

ancillary proceeding, Appellants can raise only those third-party interests. See United States v.

Huntington Nat. Bank, 574 F.3d 329, 334 (6th Cir. 2009) (“Because § 853(n)(6) offers just two

grounds for relief, only two (closely related) substantive questions may arise when a third party

asserts an interest in forfeitable property.”).

II.

Having determined that Appellants can raise only their third-party-interest challenges in

an ancillary proceeding, we continue on with their assignments of error. In their second

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contention on appeal, they argue that the district court erroneously required them to demonstrate

the innocent source of the funds to which they lay claim. They specifically argue that the district

court improperly excused the government from its burden of demonstrating forfeitability and

shifted the burden of proof to them. Their contention, however, rests on a misapprehension of

the burden of proof in these ancillary proceedings.

Appellants are correct that “[t]he government must prove forfeiture by a preponderance

of the evidence.” United States v. Jones, 502 F.3d 388, 391 (6th Cir. 2007). During the

preliminary order phrase, the government bears the burden of proof in establishing “the requisite

nexus between the property and the offense.” Fed. R. Crim. P. 32.2(b)(1)(A). During an

ancillary proceeding, however, the burden shifts to the petitioner to establish “the petitioner’s

third-party claim by a preponderance of the evidence.” United States v. Salti, 579 F.3d 656, 661

(6th Cir. 2009). As our sister circuit has noted, “Congress chose to place the burden of proof on

the third-party during the ancillary proceeding, since the government would necessarily have

carried its burden of proving that the defendant’s interest in the property was subject to forfeiture

during the criminal trial.” United States v. Gilbert, 244 F.3d 888, 911 (11th Cir. 2001),

superseded on other grounds as recognized in United States v. Marion, 562 F.3d 1330 (11th Cir.

2009). Appellants’ contention that the district court improperly shifted the burden of proof in the

ancillary proceeding is mistaken. The burden of proof properly belonged to the Appellants

throughout that proceeding.

To the extent that Appellants are contending that the government did not meet its burden

of proof in the preliminary order of forfeiture against Bryan, they lack standing to make this

claim. Just as they cannot challenge the property’s inclusion in the preliminary order, they

cannot challenge the government’s success in carrying its burden of furnishing its proposed list

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of forfeitable property. That challenge was Bryan’s to raise, and he did, in fact, raise it. See

Coffman, 574 F. App’x at 561.

III.

Having noted that Appellants cannot challenge the preliminary order of forfeiture, that

they maintained the burden of proof throughout the ancillary proceeding, and that they may raise

only claims about their interests in the forfeitable property, we move on to those claims. Megan

and Dacorta contend that even if they had the burden of proof at the ancillary proceeding, they

met their burden by showing that they exercised complete control over the bank account funds in

question. We review de novo the district court’s interpretation of federal forfeiture laws. United

States v. O’Dell, 247 F.3d 655, 679 (6th Cir. 2001). The district court’s findings of facts, on the

other hand, we review for clear error. United States v. Smith, 749 F.3d 465, 488 (6th Cir. 2014).

As mentioned, the government pursued the forfeiture of the bank account funds under

two different statutory provisions. First, it sought the actual investor funds as proceeds of the

fraud under 18 U.S.C. § 981(a)(1)(C). Second, it sought the remainder of the funds in the

accounts as property “involved in” the money laundering under 18 U.S.C. § 982(a)(1). These

two statutory provisions carry with them different rules and standards. For instance, the

requirement, on which the district court relied heavily, that an individual show the innocent

source of funds is relevant only in the proceeds context. The Seventh Circuit has held that

“[p]robable cause to believe that the proceeds of the fraud exceed the balance of the account at

the time of seizure justifies calling on the claimant to identify sums derived from lawful

activities.” United States v. $448,342.85, 969 F.2d 474, 477 (7th Cir. 1992). A petitioner can

recover funds by demonstrating their innocent source because, in the context of proceeds, “the

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presence of one illegal dollar in an account does not taint the rest—as if the dollar obtained from

fraud were like a drop of ink falling into a glass of water.” Id. at 476.

That same requirement, however, does not apply in the context of property “involved in”

the money laundering under § 982(a)(1). “Property under [this] statute includes the money or

other property being laundered (the corpus), any commissions or fees paid to the launderer, and

any property used to facilitate the laundering offense.” United States v. Puche, 350 F.3d 1137,

1153 (11th Cir. 2003) (internal citations and quotation marks omitted). “Facilitation occurs

when the property makes the prohibited conduct less difficult or more or less free from

obstruction or hindrance.” Id. Thus, “even legitimate funds that are commingled with

illegitimate funds can be forfeited if the legitimate funds were somehow involved in the offense,

such as by helping to conceal the illegal funds.” United States v. Baker, 227 F.3d 955, 970 n.4

(7th Cir. 2000). It is not relevant to the forfeitability analysis in the “involved in” context

whether or not funds are “innocent”; any so-called facilitation funds—innocent or not—are

forfeitable if they are found to have aided in concealing the money laundering.2

After the court issues a preliminary order of forfeiture, if no third party requests an

ancillary proceeding, “the preliminary order becomes the final order of forfeiture.” Fed. R.

Crim. P. 32.2(c)(2). And the government owns the forfeitable property from the moment of the

commission of the offenses, found in the so-called relation-back clause: “All right, title and

interest” in forfeitable property “vests in the United States upon the commission of the act giving

rise to forfeiture.” 21 U.S.C. § 853(c). Thus, “[a]fter the commission of the criminal acts, title

to forfeitable property, by operation of the relation-back clause, actually belongs to the

government.” United States v. Harris, 246 F.3d 566, 575 (6th Cir. 2001) (quoting United States

2
The district court ordered that certain funds should be removed from the final order of forfeiture because
Appellants had proven an innocent source of those funds. Although this determination is inconsistent with our
holding here, the government did not appeal that order, and we do not address it here.

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v. Lavin, 942 F.2d 177, 186 (3rd Cir. 1991)). In fact, the statute provides only two exceptions to

this relation-back principle: if, at an ancillary proceeding, the petitioner shows that his interest in

the property was superior to the defendant’s (now government’s) interest or that he was a bona

fide purchaser for value. 21 U.S.C. § 853(n)(6).

To summarize, under the relation-back clause, the government steps into the shoes of the

defendant as to any forfeitable property from the point of the commission of the money

laundering. When the government has pursued funds as being “involved in” the money

laundering, once the preliminary order of forfeiture is issued, the government obtains an interest

in all forfeited funds—innocent or otherwise—retroactive to the day the money laundering

began. At the ancillary proceeding, then, the burden is on the petitioner to prove that he has an

interest superior to that of the government, or that he is a bona fide purchaser for value. If the

petitioner cannot show one of these two things, then the property is forfeited to the government.

Appellants are correct in their contention that they do not need to demonstrate the

innocent source of all the monies that are admittedly not proceeds of the fraud. But this does not

help them because the “innocent” funds were forfeited under the theory that they were “involved

in” the money laundering by helping to conceal the crime. And although Appellants admit that

they have no legal interest in the proceeds, they do argue that they have a superior interest in the

facilitation funds. Their argument boils down to their belief that because the name “Megan

Coffman” or “Dacorta” is on the bank accounts, they have shown a superior interest. Bare legal

title, however, “in the absence of assertions of dominion, control or some other indicia of

ownership of or interest in the seized property, is insufficient to confer standing to challenge a

forfeiture.” United States v. $515,060.42, 152 F.3d 491, 498 n.6 (6th Cir. 1998). This is so

because “people engaged in illegal activities often attempt to disguise their interests in property

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by placing title in someone else’s name . . . . In short, courts look behind the formal title to

determine whether the record title owner is a ‘strawman’ set up to conceal the financial affairs of

illegal dealings of someone else.” United States v. Carrell, 252 F.3d 1193, 1204 (11th Cir. 2001)

(internal quotation marks and citation omitted).

Neither Megan nor Dacorta has carried the burden of proving that they asserted primary

dominion or control over the funds in the accounts. In its preliminary order of forfeiture, which

Appellants cannot challenge, the district court found that the funds were forfeitable in their

entirety. The onus is on Megan and Dacorta to prove by a preponderance of the evidence that

they asserted dominion or control over the accounts. They have not done so. Of the roughly

three million dollars in the bank accounts, about half is directly traceable to the fraud as

proceeds. This means that Bryan was able to launder almost one and a half million dollars

through accounts Appellants claim to have controlled.

Appellants’ lack of control is evident in various statements Megan made during the

ancillary proceeding. For instance, when asked why her husband gave her a check for $100,000

to deposit into an account, she postulated that he was simply feeling “very happy and generous at

the time.” Further, when Bryan asked her to write him a check for $600,000 while leaving the

payee line blank, Megan complied without hesitation. And when Bryan transferred his interest

in their joint financial account to her for “estate planning” purposes, she accepted his purported

estate-planning expertise unquestioningly. Megan’s testimony shows that Bryan had primary

control of the money coming into the accounts, the money when it was in the accounts, and the

money going out of the accounts. Indeed, the clearest proof that Bryan was actually in control of

the financial accounts is that, as the district court noted, Bryan was convicted of money

laundering based on charges rooted in all these accounts, whereas Megan was acquitted.

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Appellants provided no convincing evidence to the contrary. In fact, all of the accounts were

created after the fraud began and also after the civil action against Mid-America had been

initiated. We agree with the district court that it is at least more likely than not that these

accounts were created in order to conceal Bryan’s money laundering.

Appellants have not demonstrated a superior interest in the funds, because Bryan

exercised dominion and control over them. The district court did not err by including the funds

in its final order of forfeiture.

IV.

Baniel challenges the district court’s including in the final order of forfeiture a yacht

titled in its name. Rather than relying on a superior interest, Baniel claims that it is a bona fide

purchaser for value. “This bona fide purchaser exception protects a third party who acquires a

legal interest in property for value after the acts giving rise to the forfeiture have occurred and

who had no reason to believe that the property was subject to forfeiture.” United States v.

Huntington Nat. Bank, 682 F.3d 429, 433 (6th Cir. 2012) (emphasis in original). The relevant

inquiry is not whether the petitioner actually believed that the property was subject to forfeiture,

but whether the petitioner “was at the time of purchase reasonably without cause to believe that

the property was subject to forfeiture.” 21 U.S.C. § 853(n)(6)(B).

Baniel has not met its burden of proving by a preponderance of the evidence that it was

reasonably without cause to believe that the yacht was subject to forfeiture. Megan, on behalf of

Baniel, paid $900,000 cash for the yacht. Of that money, $450,000 is admittedly from investor

funds. The only way that Baniel would be a bona fide purchaser for value, then, is if it was

reasonably without cause to believe that that money was not subject to forfeiture as proceeds of

the fraud. At the ancillary proceeding, Megan recounted how she obtained the $450,000 in

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investor funds. Sometime in July 2008, Bryan came home one day and asked her for a $600,000

loan which he said he would pay back right away. He never said where the money was going,

and Megan never asked. Bryan further told her to leave the payee line of the check blank, an

instruction Megan followed without hesitation. Four days later, Bryan repaid $460,000 of the

$600,000 loan out of investor funds. Megan then used that money as half of the down payment

for the yacht, on behalf of Baniel.

Baniel bought the yacht on August 1, 2008. But in 2007, the SEC was already

investigating Milby. Bryan was served with a subpoena for his financial records in connection

with the SEC investigation in June 2008. Further, throughout 2008 Bryan had transferred many

properties the couple had held jointly solely into Megan’s possession. Given the red flags

around Bryan’s financial status in August 2008, Baniel has not shown by preponderance that it

was reasonably without cause to believe that the money was not proceeds of the fraud. Baniel

was thus not a bona fide purchaser for value, and the district court did not err by including the

yacht in its final order of forfeiture.

V.

Megan further challenges the district court’s inclusion of Bryan’s interest in eight

properties determined by the court to be held in tenancies by the entirety. At the time of the

forfeiture, three of the properties were held in tenancies by the entirety, whereas the other five

were ostensibly held solely in Megan’s name. These five properties, however, had been held in

tenancies by the entirety until December 2007, at which point Bryan transferred his interest in

them to Megan by quit-claim deeds. The government claims that Bryan’s interests in all eight

properties are forfeitable because the December 2007 transfers were fraudulent. Again, because

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all eight properties were included in the preliminary order of forfeiture, the onus is on Megan to

prove that the transfers were not fraudulent.

The eight pieces of real property were included in the preliminary order of forfeiture as

substitute assets. 21 U.S.C. § 853(p) allows for the forfeiture of substitute property if the actual

property subject to forfeiture cannot be fully located upon the exercise of due diligence. Because

the judgment against Bryan was almost thirty-three million dollars, but the property subject to

forfeiture did not reach this amount, the government sought these pieces of real property as

substitute assets toward its judgment. That being said, substitute property must be “property of

the defendant.” Id. § (p)(2). Megan’s claim, therefore, is that she has a superior interest in the

five pieces of real estate which had been transferred solely into her name and so the real

properties were improperly forfeited, namely because they were no longer the property of Bryan.

Her challenge is primarily premised on her contention that fraudulent conveyance law is

inapplicable to federal forfeiture proceedings. Federal courts, however, have used fraudulent

conveyance statutes in forfeiture proceedings. See, e.g., United States v. Frykholm, 362 F.3d

413, 417 (7th Cir. 2004) (applying Wisconsin fraudulent conveyance law). In fact, federal courts

must apply these statutes if applicable, because “[s]tate law defines and classifies property

interests for purposes of the forfeiture statutes, while federal law determines the effect of the

property interest on the claimant’s standing.” United States v. Salti, 579 F.3d 656, 669 (6th Cir.

2009) (quoting United States v. 5 S 351 Tuthill Road, Naperville, Ill., 233 F.3d 1017, 1021 (7th

Cir. 2001)).

Kentucky law provides that “[e]very gift, conveyance, assignment or transfer of, or

charge upon, any estate, real or personal . . . made with the intent to delay, hinder or defraud

creditors, purchasers or other persons . . . shall be void as against such creditors, purchasers, and

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other persons.” Ky. Rev. Stat. Ann. § 378.010. “Between persons closely related, such as

husband and wife, the transaction must be closely examined to see that no subterfuge is

employed.” Hayes v. Rodgers, 447 S.W.2d 597, 600 (Ky. 1969). “When such a transaction is

exposed to scrutiny, the burden is always upon the recipient of the property acquired to show that

the conveyance was fairly made and not tainted with an intent to accomplish a fraudulent

purpose.” Bolling v. Adams, 296 S.W.2d 696, 699 (Ky. 1956). Badges of fraud often

accompany fraudulent purposes. “A transfer between two related parties is typically a badge of

fraud.” Jadco Enter., Inc. v. Fannon, 991 F. Supp. 2d 947, 951 (E.D. Ky. 2014) (applying

Kentucky law). “When a conveyance is attended with badges of fraud, the burden of proving

good faith shifts to the one defending its integrity; and when that status has been reached, the

grantee’s failure to produce available explanatory evidence becomes in itself an additional badge

of fraud.” Jones v. Jones, 71 S.W.2d 999, 1004 (Ky. 1934).

The December 2007 transfers were transfers between two related parties. Megan is

wholly unable to produce explanatory evidence as to why the transfers took place. And although

Megan claims the transfers were done to equalize their estates for estate-planning purposes, she

offered no evidence during the ancillary proceeding that these transfers would have helped

balance the couple’s estates. For the first time, on appeal, she included some provisions of the

tax code in her brief’s addendum in order to show the benefit of the transfers, but that

information was not introduced in the district court at the ancillary proceeding, and we will not

consider it. On the other hand, the government introduced evidence from Bryan’s paralegal that

Bryan was concerned about someone’s suing him and coming after his personal assets, so he

planned to transfer his property to his wife.3 In sum, Megan is not able to show a superior

3
Although Appellants contend that this statement was hearsay, the district court admitted the statement during the
ancillary proceeding and Appellants do not challenge that decision on appeal as an evidentiary violation.

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interest in the property by showing that the transfers were not fraudulent. At the time of the

forfeiture, therefore, all eight properties were held jointly by Bryan and Megan. The district

court thus did not err by including Bryan’s interest in all eight pieces of real property in the final

order of forfeiture.

VI.

Appellants also raise some broader constitutional claims regarding the ancillary

proceeding and the final order of forfeiture. First, they contend that the forfeiture proceedings

subjected Megan to double jeopardy and violated Appellants’ Eighth Amendment rights. Having

been acquitted of the money laundering charges against her, Megan argues that the forfeiture of

hundreds of thousands of dollars of her assets constitutes a successive prosecution and

punishment. This contention is meritless. Even assuming the assets in question were hers,

double jeopardy would not apply because this forfeiture proceeding is a component of Bryan’s

sentence, not her prosecution and acquittal. Megan voluntarily entered the forfeiture proceeding

by petitioning for an ancillary hearing. This voluntary participation exposes the contradiction in

her assertion that she was successively prosecuted through the ancillary proceeding. Further, as

we have already explained, Bryan asserted dominion and control over the assets, and because the

conveyances were fraudulent, maintained an interest in the real properties. Therefore, the district

court did not forfeit thousands of dollars of Megan’s assets.

Appellants’ Eighth Amendment claim of violation of the Excessive Fines Clause fails for

similar reasons. Megan was not facing another prosecution, and thus she did not face the

possibility of a fine. Instead, Appellants inserted themselves into Bryan’s forfeiture proceedings

in order to claim an interest in some of the property. They cannot now, after having intervened

in the proceedings, claim that the order of forfeiture operates as a fine, even if they eventually

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lose what they believe are their assets. The ancillary proceeding did not subject Megan to double

jeopardy or Appellants to excessive fines.

VII.

Appellants further contend that the district court violated their due process rights by

delaying the adjudication of their claims for nearly four and a half years—from their property’s

initial seizure in late 2008 to the ancillary hearing in March 2013. This circuit weighs four

factors in assessing whether delay in bringing a forfeiture action violates due process: “the length

of the delay, the reason for the delay, the claimant’s assertion of his right, and the prejudice to

the claimant.” United States v. Ninety Three Firearms, 330 F.3d 414, 424–25 (6th Cir. 2003)

(citing Barker v. Wingo, 407 U.S. 514, 530 (1972)); see also United States v. Banco Cafetero

Panama, 797 F.2d 1154, 1163 (2d Cir. 1986) (applying Barker framework to holding of the

forfeiture trial as well as to the filing of the action). “The length of the delay is to some extent a

triggering mechanism. Until there is some delay which is presumptively prejudicial, there is no

necessity for inquiry into the other factors that go into the balance.” Barker, 407 U.S. at 530.

Assuming arguendo that four and a half years is presumptively prejudicial, Appellants’ claim

fails on each of the other three factors.

The government has provided a persuasive reason for the delay. Although the civil

forfeiture complaint was filed in 2008, the government petitioned almost immediately for a stay

of the case pending any criminal action. The criminal action was initiated in December 2009 and

was not completed until the jury verdict in May 2011. As the Supreme Court has noted, pending

criminal proceedings can justify delay in instituting civil forfeiture proceedings. United States v.

$8,850 in U.S. Currency, 461 U.S. 555, 567 (1983). The remaining time can be attributed to the

judicial process at work. In July 2011, the government moved for a preliminary order of

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forfeiture. In September 2011, the court took the matter under advisement. In April 2012, the

court issued its preliminary order of forfeiture. Soon after, Appellants petitioned for an ancillary

hearing. In June 2012, the district court allowed discovery on the ancillary hearing issues. In

January 2013, the parties filed motions for summary judgment. The district court subsequently

rejected the motions for summary judgment and scheduled the ancillary hearing for March 2013.

After conducting the ancillary hearing in March 2013, the court issued its opinion in January

2014. Given the complex nature of the claims in this case, the ongoing appeals by parties

involved, and the amount of time needed for many of these steps, we do not believe that the

reason for the delay was improper.

The third factor is the claimant’s assertion of his right. Here, Appellants asserted their

rights almost immediately after the court issued its preliminary order of forfeiture in April 2012.

This, however, shows a weakness in Appellants’ argument. Although the forfeiture proceedings

can be traced back to 2008, Appellants’ role in the proceedings did not arise until 2012. While

we understand Appellants’ frustration with having to wait for the criminal case to end and the

preliminary order of forfeiture to be released, “we are readily satisfied that the system set out in

§ 853 provides them with due process.” United States v. Holy Land Found. for Relief and Dev.,

493 F.3d 469, 478 (5th Cir. 2007).

This conclusion is further bolstered by the fact that Appellants have shown no prejudice

from the delay. “The primary inquiry here is whether the delay has hampered the claimant in

presenting a defense on the merits, through, for example, the loss of witnesses or other important

evidence.” $8,850, 461 U.S. at 569. Appellants have failed to provide any evidence of how the

delay has prejudiced them. Accordingly, we must conclude that no such prejudice exists.

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Weighing the four factors, we hold that Appellants were not denied due process by the

supposed delay in the proceedings. Although the ancillary proceeding was held almost four and

a half years after the filing of the initial forfeiture complaint, the intervening criminal trial and

appeals necessitated much of the delay.

VIII.

Appellants’ final contention is that the district court erred by entering a final order of

forfeiture without addressing their civil forfeiture claims. Their argument is premised on the

belief that their claims should be granted under the civil forfeiture “innocent owner” defense of

18 U.S.C. § 983(d). However, as they note in their brief, in its final order of forfeiture, the

district court implicitly rejected their claim that they were innocent owners. Finding no error in

the district court’s factual determinations and ultimate conclusions, we find no error in the

district court’s issuing of one order of forfeiture to terminate both the criminal and civil

forfeiture actions.

IX.

For the foregoing reasons, we AFFIRM the district court’s final order of forfeiture as to

Megan Coffman, Baniel, and Dacorta.

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