United States District Court, D. Colorado
PHILIP A. BRIMMER, District Judge.
This matter is before the Court on the Motion for Summary Judgment [Docket No. 78] filed by plaintiff the United States of America (the "United States"). This is a forfeiture case wherein the United States seeks to forfeit a residence purchased with money obtained through fraud and used to conduct further fraudulent activity. The Court's jurisdiction is based on 28 U.S.C. § 1331.
The following facts are undisputed unless otherwise indicated. In 2007, Richard and Marie Dalton began operating Universal Consulting Resources, LLC ("UCR"). Docket No. 78 at 2-3, ¶¶ 1-2; Docket No. 82 at 2, ¶¶ 1-2. UCR was used in a classic Ponzi scheme. Through UCR, the Daltons solicited investors for two programs: the "Trading Program, " which purportedly traded in financial instruments, and the "Diamond Program, " which purportedly traded in precious stones. Docket No. 78 at 3, ¶¶ 3-4; Docket No. 82 at 2, ¶¶ 3-4. The Daltons guaranteed investors returns of between 48% and 120% annually. Docket No. 78 at 3, 5, ¶¶ 6(a), 11; Docket No. 82 at 2, ¶¶ 6, 11. The Daltons commingled investors' money in UCR's Bank of America account, from which investors also received checks for their "profits." In actuality, funds from new investors were being used to pay existing investors. Docket No. 78 at 4, 5, ¶¶ 9, 12; Docket No. 82 at 2, ¶¶ 9, 12.
In July 2009, the Daltons purchased defendant Cole Street, which is residential property located in Golden, Colorado, with $930, 298.08 that they wired from accounts containing UCR investors' money to their personal bank account. Docket No. 78 at 6-7, ¶¶ 21-24; Docket No. 82 at 2-3, ¶¶ 21-24. The title for defendant Cole Street is in the name of Marie Dalton. Docket No. 78 at 7, ¶ 25; Docket No. 82 at 3, ¶ 27. The Daltons subsequently lived in and operated UCR out of the defendant property. Docket No. 78 at 3, ¶ 2; Docket No. 82 at 2, ¶ 2.
In October 2010, claimant George Magnani, who had invested $100, 000.00 with UCR, filed a complaint against Richard Dalton and UCR in the District Court for the County of Jefferson, Colorado, alleging breach of contract, civil theft, breach of fiduciary duty, and fraud. Docket No. 82 at 5, ¶ 14; Docket No. 83 at 2.
On November 16, 2010, the Securities and Exchange Commission ("SEC") filed a civil action against Richard Dalton and UCR in the United States District Court for the District of Colorado. Docket No. 78 at 5, ¶ 13; Docket No. 82 at 2, ¶ 13; see Case No. 10-cv-02794-REB-KLM. The following day, the SEC recorded a Notice of Lis Pendens in Jefferson County against defendant Cole Street. Docket No. 78 at 5, ¶ 14; Docket No. 82 at 2, ¶ 14.
After learning through the SEC complaint that investor funds had been used to purchase defendant Cole Street, Mr. Magnani filed an action on May 12, 2011 against Marie Dalton in the District Court for the County of Jefferson, alleging civil conspiracy, civil theft, conversion, unjust enrichment, and aiding and abetting a breach of fiduciary duty. Docket No. 78-11.
On October 19, 2011, the Daltons were charged in a criminal case on a nineteen-count indictment with, inter alia, wire fraud, mail fraud, money laundering, and civil conspiracy. See Case No. 11-cr-00430-CMA.
On August 11, 2011, the United States filed its Verified Complaint for Forfeiture in Rem [Docket No. 1] in this case seeking forfeiture of defendant Cole Street. On August 18, 2011, the United States recorded a Notice of Lis Pendens in Jefferson County against defendant Cole Street. Docket No. 78-12.
On November 18, 2011, the court in Jefferson County entered a default judgment against Marie Dalton and in favor of Mr. Magnani in the amount of $910, 356.44, plus post-judgment interest, attorney's fees, and costs. Docket No. 78 at 8, ¶ 29; Docket No. 82 at 3, ¶ 29. On December 1, 2011, the United States recorded a second Notice of Lis Pendens against defendant Cole Street. Docket No. 78-14. On December 12, 2011, Mr. Magnani recorded a Transcript of Judgment in Jefferson County, listing the judgment debtors as Marie Dalton and the Cole Street property. Docket No. 78-15.
On March 27, 2012, Mr. Magnani's counsel was first served with a copy of the United States' civil forfeiture complaint. Docket No. 82 at 7, ¶ 25; Docket No. 82-7; Docket No. 83 at 2. On April 12, 2012, Mr. Magnani filed a verified claim [Docket No. 47] in this case, asserting an interest in defendant Cole Street on the basis of a recorded judgment. Docket No. 78 at 8, ¶ 32; Docket No. 82 at 3, ¶ 32. No other parties have filed claims in this action.
In February 2012, the SEC obtained an award against the Daltons and UCR in the amount of $15, 842, 948.00. Docket No. 82-8 at ¶ 5; Case No. 10-cv-02794-REB-KLM, Docket No. 99. The court ordered that defendant Cole Street be sold in order to pay part of the judgment. Id. at ¶ 7.
On February 21, 2013, Marie Dalton pled guilty to the charge of conspiracy to commit mail fraud, wire fraud, and money laundering in violation of 18 U.S.C. § 371. Case No. 11-cr-00430-CMA, Docket No. 156. On the same day, Richard Dalton pled guilty to the charge of money laundering in violation of 18 U.S.C. §§ 2 and 1957. Id. at Docket No. 159. On June 10, 2013, Marie Dalton was sentenced to a term of sixty months in prison and Richard Dalton was sentenced to a term of 120 months. Id. at Docket Nos. 211, 212, 214, and 217. The Daltons agreed to the forfeiture of defendant Cole Street in their plea agreements. Id. at Docket No. 156 at 12, ¶ K(3); ...