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United States v. Saoud

United States District Court, N.D. West Virginia

July 3, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
ALLEN G. SAOUD, Defendant.

          MEMORANDUM OPINION AND ORDER DENYING THE GOVERNMENT'S MOTION TO HOLD ATTORNEY PAUL HARRIS IN CIVIL CONTEMPT [DKT. NO. 265]

          IRENE M. KEELEY UNITED STATES DISTRICT JUDGE.

         The Government instituted this civil contempt proceeding on April 21, 2017, when it moved for an order directing attorney Paul Harris (“Harris”) to show cause why he should not be held in civil contempt for converting restrained assets to pay attorney's fees (Dkt. No. 265). Since that time, the Court has conducted three hearings on the motion, including an evidentiary hearing (Dkt. Nos. 279; 289; 301), and has received post-hearing briefs from the parties (Dkt. Nos. 311; 312). After considering the record and applicable law, concluding that the Government has not met its burden to establish that Harris should be held in contempt, the Court DENIES the motion (Dkt. No. 265).

         I. FINDINGS OF FACT

         On December 4, 2012, a grand jury sitting in the Northern District of West Virginia returned a 23-count indictment against the defendant, Allen G. Saoud (“Saoud”), charging him with health care and bankruptcy fraud, among other offenses (Dkt. No. 1). The grand jury subsequently returned two superseding indictments (Dkt. Nos. 29; 56). Although Saoud initially was represented by attorney Stephen G. Jory, the Court granted Harris's motion to substitute as counsel on January 17, 2013 (Dkt. No. 19).

         On June 25, 2013, following a ten-day jury trial, Saoud was convicted of thirteen counts of health care fraud, one count of aggravated identity theft, one count of concealment of a health care matter, one count of a corrupt endeavor to obstruct and impede the due administration of internal revenue laws, five counts of bankruptcy fraud, and one count of false statement to a federal agent (Dkt. No. 106). On August 13, 2013, the Government moved for a preliminary order of forfeiture reflecting a forfeiture money judgment of $1, 243, 118.29 against Saoud (Dkt. No. 118).

         On November 15, 2013, the United States Probation Office disclosed Saoud's Presentence Investigation Report (“PSR”) (Dkt. No. 290 at 2). Following a review of the PSR, Harris filed nine written objections, after which a revised PSR was filed on December 12, 2013. Id. at 2, 66-81. In an effort to calculate Saoud's net worth, and thus his ability to pay a fine, the Probation Officer compiled a list of Saoud's assets, including his equity interest in more than $11.9 million of real property. Id. at 52-56. Notably, the PSR acknowledged that the assets “include personal assets and assets owned by ACC Properties, LLC; Allen-Sean Subsidiaries, LLC; Titanium Real Estate; AGS Development, LLC; and Prime Space, LLC.” Id. at 54. Saoud did not object to the characterization of his interest in these assets, despite the fact that they were titled to limited liability companies that he shared with his wife, Jennifer Saoud (“Mrs. Saoud”).[1]

         On January 3, 2014, attorney Robert G. McCoid (“McCoid”) noted his appearance for Saoud (Dkt. No. 151), following which Harris moved to withdraw as counsel of record on January 7, 2014, because he had been placed on home confinement by the state of West Virginia and was unable to meet with Saoud or interview witnesses (Dkt. No. 154). That same day, Harris and McCoid moved to continue the sentencing hearing scheduled for January 14, 2014, so that McCoid could “effectively and adequately prepare for sentencing, ” and also to allow Saoud “ample time to finalize the real estate transactions necessary to satisfy the Government's forfeiture allegations” (Dkt. No. 155). According to the motion, Saoud had “reached a mature stage of negotiations” with regard to a sale of the following:

properties located at 162, 164, and 170 Thompson Drive in Bridgeport, West Virginia; a property development located at the Mileground in Morgantown, West Virginia[, ] containing twenty (20) nearly completed townhomes; a group of properties located in Jane Lew, West Virginia, including eleven (11) apartment units, four (4) townhouses, and ten (10) trailer rental spots; and Fairmont-based properties that contains [sic] four (4) homes located at the Fairmont Homes rental lot and an additional lot in Deerfield with foundation already finished.

Id. at 3-4. The Court granted the motion and rescheduled Saoud's sentencing for March 25, 2014 (Dkt. No. 161).

         At the sentencing hearing, the Court sentenced Saoud to a total term of 99 months of incarceration with 3 years of supervised release to follow (Dkt. No. 170 at 1-3). It also imposed a mandatory special assessment of $2, 200.00, a fine of $2, 630, 000.00, and a forfeiture money judgment of $1, 243, 118.29. Id. at 5-7. The Court left open the amount of restitution for later determination. Id. at 5. Harris noted his appearance as appellate counsel on May 30, 2014. Thereafter, on June 5, 2014, the Court amended its judgment to include an amount of $265, 330.04 in restitution (Dkt. No. 196 at 5).

         On July 1, 2014, the Government and Saoud, through McCoid, jointly moved the Court “to enter an agreed order restraining certain assets of the defendant” that could be used to satisfy the money judgment and restitution (Dkt. No. 199 at 1-2). At that time, Saoud was “negotiating the sale of several parcels of real estate for approximately $4.5 million” of which he anticipated receiving $2.5 million by January 2015. Id. at 2.

These properties include[d]: commercial buildings located at 162, 164, and 170 Thompson Drive in Bridgeport, West Virginia; a property development located at the Mileground in Morgantown, West Virginia[, ] containing almost twenty (20) nearly completed townhouses; a group of properties located in Jane Lew, West Virginia, including eleven (11) apartment units, four (4) townhouses, and ten (10) trailer rental spots; and Fairmont-based properties that include four (4) homes located at the Fairmont Homes rental lot and an additional lot in Deerfield with foundation already finished.

(Dkt. No. 201 at 2-3). The Government and Saoud agreed that these transactions should move forward so long as Saoud used $1, 508, 448.33 of the proceeds to satisfy his obligations to the Government and victims in this case (Dkt. No. 199 at 2).

         As the parties requested, on July 3, 2014, the Court entered an Agreed Order Restraining Defendant's Assets (“Agreed Order”), which applied to “Defendant's assets pending appeal” (Dkt. No. 201 at 1). The Agreed Order made reference to the forfeiture money judgment and acknowledged the Court's power to restrain substitute assets under 21 U.S.C. § 853. Id. at 2. It specifically directed Saoud to deposit $1, 508, 448.33 from the proposed sales in an interest-bearing account until after the resolution of his appeal. Id. at 3-4. In addition, the Agreed Order stated as follows:

Seventy-five percent (75%) of the proceeds from any other real estate transactions shall be placed in escrow up to the anticipated amount of forfeiture of one million two hundred forty-three thousand one hundred eighteen dollars and twenty-nine cents ($1, 243, 118.29) in addition to three hundred thousand dollars ($265, 330.04) for restitution, and notice shall be provided to the Government regarding the consummation of any such real estate transactions as well as notice of any property sold and the amount of any proceeds obtained from such sale(s).

Id. at 4. The properties specifically identified in the Agreed Order were never actually sold (Dkt. No. 308 at 61-62).

         Despite having been removed as counsel of record in January 2014, Harris apparently remained involved in the proposed property sales (Dkt. No. 307-1 at 79, 86), and also reviewed the Agreed Order. In point of fact, Harris met with Saoud and McCoid in February 2014 to review the Agreed Order (Dkt. Nos. 302-10; 307-1 at 80), and in May 2014, shortly before noting his appearance as appellate counsel, reviewed a draft of the Agreed Order and again met with McCoid (Dkt. No. 307-1 at 87).

         Throughout 2014 and 2015, Mrs. Saoud facilitated the sale of the following properties:[2]

Property Sold

Closing Date

Net Proceeds

Worthington Drive #4

October 2014

$36, 936.17

512 Worthington Drive #3

October 2014

$61, 032.38

104 Acres Jack Run

October 2014

$172, 390.01

512 Worthington Drive #14

December 2014

$63, 315.33

512 Worthington Drive #11

March 2015

$58, 154.62

Worthington Drive #8

March 2015

$60, 387.73

Natalie Drive (Lot 16 Rosewood Heights)

May 2015

$31, 763.85

19.55 Acres Woodcrest

June 2015

$164, 774.88

TOTAL

$648, 754.97

         Although none of these properties (collectively, “the Property”) was specifically restrained by the Agreed Order (Dkt. No. 201), each was owned by AGS Development, LLC; Prime Space, LLC; or Titanium Properties, LLC. As discussed, the PSR listed assets of these limited liability companies as assets in which Saoud held an interest (Dkt. No. 290), and Mrs. Saoud testified that Saoud instructed her to sell the properties for the purpose of paying restitution (Dkt. No. 268-3 at 28).

         Following each of the sales in 2014 and 2015, Mrs. Saoud tendered the net proceeds to Harris Law Offices and executed a contemporaneous acknowledgment that the funds would “be immediately used to pay towards outstanding legal bills” (Dkt. No. 292-7 at 2). Mrs. Saoud subsequently testified, during both a deposition and an evidentiary hearing in connection with the Government's pending motion, that the funds were meant to be applied to Saoud's restitution (Dkt. No. 268-3; 308 at 14).[3]

         Joyce Price (“Price”), Saoud's sister and the accountant for his companies, also testified on two occasions that the net proceeds at issue were to be used “to pay the restitution and fines and penalties” (Dkt. Nos. 278-1 at 8-9; 308 at 28). In fact, on 2014 and 2015 tax filings for the companies, Price reported significant expenses for “Government fines and penalties, ” not attorney fees (Dkt. Nos. 302-1 at 4, 16; 302-2 at 4, 13; 302-3 at 15; 302-4 at 11). Nonetheless, according to Harris, he used $352, 556.00 of the net proceeds, which had been deposited in the Harris Law Offices trust account, to pay his attorney fees incurred during Saoud's criminal trial (Dkt. Nos. 274 at 6; 312 at 4).[4] The Government contends that, as a consequence of these payments, Harris is in contempt of the Court's forfeiture order and the Agreed Order (Dkt. No. 265).

         II. ...


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