Senior Partner, Law Offices of Stephen Moskowitz, LLP
California Penal Code Section 186.11 is known as the ‘Freeze and Seize Law.’ This law allows a court to preserve a criminal defendant’s assets in order to pay restitution to victims and any fines imposed for their misdeeds. Any money in bank accounts, assets controlled by other financial institutions and even real property can be frozen or seized when the initial complaint or indictment is filed-even before a conviction or a judgment is entered.
What the Prosecution Must Show
A court is able to freeze and seize assets under Section 186.11 when the prosecutor alleges that a person has committed two or more related felonies (involving fraud or embezzlement) which involve a pattern of related felony conduct. This means that at least two of the felonies must have a similar “purpose, result, principals, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics, and…are not isolated events.” Section 186.11 is an enhancement – known as the “aggravated white collar crime” enhancement – that will result in 2, 3 or 5 additional years in prison if plead to or proven at trial.
The Means Used to Seize Property Under Section 186.11
A person charged with the aggravated white collar crime enhancement may have frozen or seized any asset or property in his control, or any asset or property that was transferred to a third party after the commission of an alleged criminal act. (Note there is an exception for an innocent party who purchases property without notice of any other party’s claim to the title of that property.) The prosecution has the ability to seek a temporary restraining order or preliminary injunction in order to prevent any further transfer or disposition of property. The prosecution may file for the appointment of a receiver to care for the assets or ask for any other measure necessary to maintain the status quo.
Third-Party Claimant’s Protection
A thirty-day window is available to a third party who has an interest in the preserved assets. Within the thirty days, the third party must file a verified claim with the superior court (and serve the complaint on the Attorney General or district attorney) regarding the nature and amount of the party’s interest in the protected property. The third-party claimant has the burden of proof to establish their interest in the property.
Recent Examples of the Use of Section 186.11
In May of 2009 San Francisco District Attorney Harris announced new charges against Edwin Parada regarding alleged mortgage fraud and investment scams, including charges based on Section 186.11. It was reported that Mr. Parada may have to pay nearly $3,000,000 in restitution, in addition to fees. You can read the San Francisco DA Press Release by selecting the following link: http://www.sfdistrictattorney.org/News.asp?id=517
On September 22, 2010, Michael and James Nuciforo, two owners of D&J Drywall & Painting, Inc. were sentenced to jail and probation after being convicted of felony workers’ compensation premium fraud. The defendants paid $517,433 in restitution to victims in order to mitigate their sentences. Months before sentencing, the Ventura County District Attorney’s Office announced that it had frozen 1.5 million of the defendants’ assets, even though the estimated loss in the case was only $500,000.
The freeze and seize law may be applied in less newsworthy cases as well. An unpublished opinion filed September of this year in the California Court of Appeals discusses the case of a woman who embezzled money from her employer. The court seized and sold two residential properties that she had interest in with two former spouses. The ex-husbands were found to be innocent spouses who were able to recover their interests in the seized funds. People v. Mahdavi-Cummings, Doc. G041367 (Filed 09/24/10). You can read this unpublished opinion by selecting the following link: www.courtinfo.ca.gov/opinions/nonpub/G041367.DOC
If the government is attempting to impose the freeze and seize law upon you, we want to help. We have extensive experience working with prosecutors and the courts in dealing with the application of Section 186.11 in cases involving alleged fraud and misrepresentation. Call me for your free attorney-client privileged consultation about how we can help you avoid if you are involved in this nasty imposition or if you believe that you might become subject to this.