United States v. Kollintzas, Joanna

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 06-2034

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

FRANK KOLLINTZAS,

Defendant.

APPEAL OF:

JOANNA KOLLINTZAS,

Interested Person.

____________

Appeal from the United States District Court

for the Northern District of Indiana, South Bend Division.

No. 03 CR 91—Robert L. Miller, Jr., Chief Judge.

____________

ARGUED NOVEMBER 27, 2006—DECIDED SEPTEMBER 5, 2007

____________

Before EASTERBROOK, Chief Judge, and ROVNER and

SYKES, Circuit Judges.

SYKES, Circuit Judge. A jury found Frank Kollintzas

guilty of converting large sums of money from the City of

East Chicago, Indiana. After the trial Kollintzas disap-

peared. The district court sentenced him in absentia and

ordered that he pay over $25 million in restitution. The

government immediately initiated collection proceedings,

including garnishment, under the existing criminal docket

number. While the garnishment proceedings were pending,

2 No. 06-2034

Kollintzas’s wife, Joanna, filed for divorce in Indiana

state court. The government served her with notice of the

garnishments pursuant to the requirements of the Federal

Debt Collection Procedures Act (“FDCPA”), and she made

a general appearance in the district court. She subse-

quently filed a brief asserting an interest in the property

being garnished; she argued that her interest in the

marital assets was a matter for the state court, not the

federal court, to decide. The district court disagreed and

ultimately concluded Mrs. Kollintzas had failed to estab-

lish her property interest under Indiana law. The court

granted the government’s motion to release the funds for

garnishment, and Mrs. Kollintzas appealed. We affirm.

I. Background

In November 2004 Frank Kollintzas was convicted by

a jury of converting money from the City of East Chicago,

Indiana, in violation of 18 U.S.C. § 666(a)(1). Sentencing

was scheduled for February 24, 2005, but he did not

appear. Chief Judge Robert Miller issued a bench warrant,

sentenced Kollintzas in absentia to a term of imprison-

ment, and ordered him to pay restitution of over $25

million pursuant to the Mandatory Victims Restitution

Act of 1996 (“MVRA”), 18 U.S.C. § 3663A. Kollintzas has

not been found.

The government quickly initiated efforts to collect a

portion of the $25 million Kollintzas owes in restitution.

On March 1, 2005, the government filed a Notice of Lien in

Lake County, Indiana, where Kollintzas’s property is

located. The government also initiated garnishment

proceedings before Chief Judge Miller pursuant to the

FDCPA, 28 U.S.C. §§ 3001-3308, and served interrogato-

ries on third-party account holders (“the garnishee-defen-

dants”) to determine the amounts they were holding

and to verify the names on the accounts. Based on infor-

No. 06-2034 3

mation Kollintzas had provided during the presentence

investigation and the garnishee-defendants’ interrogatory

responses, the government decided to pursue the follow-

ing assets (“the Assets”), all held in the sole name of

Frank Kollintzas unless otherwise indicated:

• Northwestern Mutual Life Insurance tax-deferred

annuity with a cash surrender value;

• School of East Chicago retirement package;

• Public Employees Retirement Fund account;

• Wachovia Securities account;

• Peoples Bank checking accounts owned by Frank

and Joanna as joint tenants with rights of

survivorship;

• Northwestern Mutual Life Insurance policies

owned by Frank and with Frank listed as the

person with the right to withdraw cash surrender

values;

• Nationwide Retirement Solutions account;

• Tech Credit Union savings and checking accounts;

• Indiana Teachers Retirement Fund;

• Funds held by the City of East Chicago as a pen-

sion package; and

• Sandridge Bank savings and checking accounts.

On March 31, 2005—while the garnishment proceedings

were pending and after the government’s liens were

perfected—Kollintzas’s wife, Joanna, filed for divorce in

Indiana state court. The state court issued an ex parte

temporary restraining order prohibiting the garnishee-

defendants, who had been served with the garnishment

notice in Kollintzas’s federal criminal case, from transfer-

ring any funds from the Assets. The government then

4 No. 06-2034

served Mrs. Kollintzas with notice of the garnishment

proceedings pursuant to the FDCPA, § 3202(c),1 so that

she could assert any claimed interest in the Assets.

Mrs. Kollintzas made a general appearance in the

district court at a status conference, and at that time

the court set a briefing schedule to address the govern-

ment’s motion for release of the specified funds for gar-

nishment purposes. Mrs. Kollintzas then filed a brief

identifying herself as an “intervenor” and asserting an

interest in Frank’s property based on the fact that she

contributed income to the marriage. She did not, however,

specify the amount of her contribution to the Assets, nor

did she indicate why she was legally entitled to any of

the Assets under state law. Instead, she argued more

generally that the Assets were part of the “marital pot”

and that it was the “province of the state trial court to

determine what interest in marital property is held by

Frank Kollintzas and what interest in marital property

is held by Joanna Kollintzas.”

The district court granted the government’s motion to

release funds. The court held that the government’s liens

relating to “all property and rights to property” of Frank

Kollintzas were superior to Mrs. Kollintzas’s claim to

marital property in the divorce proceedings because the

liens were perfected before she filed for divorce. Moreover,

the court rejected Mrs. Kollintzas’s generalized claim

1

28 U.S.C. § 3202(c) states:

(c) Service. A copy of the notice and a copy of the application

for granting a remedy under this subchapter shall be served

by counsel for the United States on the judgment debtor

against whom such remedy is sought and on each person

whom the United States, after diligent inquiry, has reason-

able cause to believe has an interest in property to which the

remedy is directed.

No. 06-2034 5

regarding her contributions to the marriage as insufficient

to establish an interest in the Assets. Shortly after grant-

ing the government’s motion, the district court issued

final garnishment disposition orders for the Assets. Mrs.

Kollintzas appealed.2

II. Discussion

A. Mrs. Kollintzas’s status as an “interested person”

under the FDCPA

Throughout these proceedings Mrs. Kollintzas has

referred to herself as an “intervenor.” This is procedurally

incorrect. She never filed a motion to intervene, nor did

the district court ever recognize her as an intervening

party. The government initiated these FDCPA collection

proceedings under the existing docket number in Frank

Kollintzas’s criminal case, and Mrs. Kollintzas partici-

pated in the proceedings through counsel after being

served with the garnishment notice. We raised the ques-

tion of Mrs. Kollintzas’s status at oral argument, and

after argument ordered supplemental briefing on the

following questions: (1) whether intervention by a private

party is proper in a criminal case; and (2) whether there

is a basis for continuing jurisdiction in the district court

to make further rulings in the criminal case.

There is no provision in the Federal Rules of Criminal

Procedure for intervention by a third party in a criminal

proceeding; intervention in civil proceedings is governed

2

After Mrs. Kollintzas filed her notice of appeal, she moved the

district court to stay collection with respect to those assets

Mrs. Kollintzas claims an interest in. The district court denied

her motion but ordered the clerk of court to hold moneys col-

lected in connection with the garnishment proceedings pending

resolution of this appeal.

6 No. 06-2034

by Rule 24 of the Federal Rules of Civil Procedure, which

does not apply in a criminal case. Mrs. Kollintzas argues

that the FDCPA collection proceedings, although techni-

cally part of Frank Kollintzas’s criminal case, were civil

in nature and therefore she could have intervened as of

right pursuant to Rule 24. The government sidesteps the

question whether intervention is available in FDCPA

proceedings initiated in the context of a criminal case; it

takes the position that Mrs. Kollintzas is not an intervenor

at all but rather an “interested person” entitled to partici-

pate in the collection proceedings under the FDCPA in

order to assert an interest in the property subject to

garnishment.

We need not decide whether intervention is ever appro-

priate in this situation; as we have noted, Mrs. Kollintzas

never sought to be recognized as an intervening party, a

step which can only be accomplished by motion. See FED.

R. CIV. P. 24(c) (“A person desiring to intervene shall serve

a motion to intervene upon the parties as provided in

Rule 5,” which “shall be accompanied by a pleading . . . .”).

Mrs. Kollintzas’s participation in the garnishment pro-

ceedings was as a person with an interest in property

subject to collection remedies under the FDCPA. That

statute is applicable to the enforcement of restitution

orders and requires the government to serve notice on

“each person whom the United States . . . has reasonable

cause to believe has an interest in property to which the

remedy is directed.” 28 U.S.C. § 3202(c).

It has been established in this and other circuits that

district courts may entertain civil garnishment and other

collection proceedings as postjudgment remedies within

an underlying criminal case; nothing precludes the gov-

ernment from initiating a collection proceeding under an

existing criminal docket number in order to collect a fine

or restitution ordered as part of the criminal sentence.

United States v. Vitek Supply Corp., 151 F.3d 580, 585-86

No. 06-2034 7

(7th Cir. 1998) (holding the government may proceed

against a corporate defendant’s alter egos as a post-

judgment remedy in a criminal case in order to collect on

restitution obligation of individual and corporate defen-

dants); United States v. Mays, 430 F.3d 963, 966 (9th Cir.

2005) (holding FDCPA procedures are available as

postjudgment remedies in criminal cases) (cert. denied, 126

S. Ct. 1416 (Feb. 21, 2006)); United States v. Timilty, 148

F.3d 1, 3 (1st Cir. 1998) (holding the government need not

reduce a restitution order to a civil judgment prior to

enforcing it; the government may proceed with collection

action within a criminal case); United States v. Thornton,

672 F.2d 101, 106 (D.C. Cir. 1982) (stating “[i]t is not

necessary [for the government] to start a new action, civil

or criminal,” to proceed with garnishment).

The Ninth Circuit’s decision in Mays is instructive here.

In Mays, the district court entered a restitution order

against the defendant pursuant to the MVRA. The govern-

ment then initiated garnishment proceedings pursuant

to § 3205 of the FDCPA under the existing criminal docket

number. The Ninth Circuit held this scenario was plainly

contemplated by the MVRA based on the language of

18 U.S.C. § 3613(a), which specifies the civil remedies

available for the satisfaction of fines, and subsection (f ) of

that statute, which makes the same procedures ap-

plicable to the enforcement of orders of restitution. Mays,

430 F.3d at 965. More specifically, § 3613(a) provides:

“The United States may enforce a judgment imposing a

fine in accordance with the practices and procedures for

the enforcement of a civil judgment under Federal law or

State law.” Subsection (f ) of § 3613 provides that “all

provisions of this section are available to the United States

for the enforcement of an order of restitution.” The FDCPA

is a procedural vehicle available to the United States

under federal law for the enforcement of its civil judg-

ments; the Ninth Circuit held that by “importing the

8 No. 06-2034

FDCPA’s procedures into the MVRA, Congress clearly

meant to make those procedures available in criminal

cases.” Mays, 430 F.3d at 966.

Accordingly, the government’s initiation of civil garnish-

ment proceedings within the criminal case was procedur-

ally appropriate under the MVRA and the FDCPA, and

there is no concern about the district court’s jurisdiction.

See Vitek, 151 F.3d at 586 (“The United States always

gets to litigate in its own courts. See 18 U.S.C. § 3231,

28 U.S.C. § 1345. Any effort to collect a debt due to the

United States presents a claim under federal law . . . .”).

And because the government specifically invoked the

remedial procedures of the FDCPA to collect restitution

in this case, Mrs. Kollintzas’s participation was not

improper, even though she was not a party.

The FDCPA requires the government to use reasonable

diligence to identify and serve notice on any person who

may have an interest in the property it targets for col-

lection proceedings under the FDCPA. See 28 U.S.C.

§ 3202(c) (requiring the government to serve a “copy of

the notice and a copy of the application for granting a

remedy under this subchapter” on “each person whom the

United States, after diligent inquiry, has reasonable

cause to believe has an interest in the property to which

the remedy is directed.”). The FDCPA also provides that

the government may proceed against jointly owned prop-

erty to the extent permitted by state law. See 28 U.S.C.

§ 3010(a) (“The remedies available to the United States

under this chapter may be enforced against property

which is co-owned by a debtor and any other person only

to the extent allowed by the law of the State where the

property is located. . . .”). The FDCPA’s third-party notice

requirement and the provision regarding jointly owned

property together imply that nonparties with an interest

in the targeted property may participate in the collection

No. 06-2034 9

proceedings for the purpose of asserting their interest

in the property.

Thus, we agree with the government that Mrs.

Kollintzas’s participation in these proceedings was as

an “interested person” under the FDCPA and not an

intervenor.3 Because the district court’s order granting

the government’s motion to release the funds for garnish-

ment was a final decision as to her claim to the Assets,

we are satisfied that this appeal is properly before us.

United States v. Elliott, 149 F. App’x 489, 492 (7th Cir.

2005) (holding that preliminary forfeiture order, rather

than final forfeiture order, was final because it was

conclusive as to defendant’s interest in the property “and

thus was the final order in the matter as to him”); United

States v. Minneman, 6 F. App’x 422, 424 (7th Cir. 2001)

(holding “disposition order concludes the garnishment

proceedings and therefore that order, and not the order

denying the debtor’s objections, is the final order from

which a debtor should appeal”); Am. Oil Co. v. McMullin,

433 F.2d 1091, 1096 (10th Cir. 1970) (holding order

unrelated to principal lawsuit final and appealable be-

cause “if there were no appeal allowed at this time, there

may never be a timely appeal”); see also Cleveland Hair

Clinic, Inc. v. Puig, 106 F.3d 165, 167 (7th Cir. 1997)

(stating for nonparty found in contempt, adjudication in

contempt usually is the final decision in the case; “there

will never be another, more conclusive, order” for the

nonparty); Carter Prods., Inc. v. Eversharp, Inc., 360 F.2d

868, 871 (7th Cir. 1966) (holding order denying motion

to compel a nonparty witness to answer questions was

a final decision because it was final “for all practical

purposes”).

3

We have revised the caption to reflect Mrs. Kollintzas’s status

in this case.

10 No. 06-2034

B. Garnishment proceedings

An order for payment of restitution becomes a lien on all

property and rights to property of the defendant upon

entry of judgment, see 18 U.S.C. § 3613(c), which in this

case was on February 24, 2005. The lien is subsequently

perfected when a notice of lien is filed, see § 3613(d); 26

U.S.C. § 6323(f ), which in this case was on March 1, 2005.

Liens to pay restitution debts are treated like tax liens, see

§ 3613(c); 26 U.S.C. § 6321 (discussing tax liens), so that

they are “effective against every interest in property

accorded a taxpayer by state law,” United States v.

Denlinger, 982 F.2d 233, 235 (7th Cir. 1992). “We look

initially to state law to determine what rights the tax-

payer [or in this case, the criminal defendant] has in the

property the Government seeks to reach, then to federal

law to determine whether the taxpayer’s state-delineated

rights qualify as ‘property’ or ‘rights to property’ within

the compass of the federal tax lien legislation.” Drye v.

United States, 528 U.S. 49, 58 (1999); United States v.

Nat’l Bank of Commerce, 472 U.S. 713, 727 (1985).

In Indiana marital property is held as a tenancy by the

entireties, so that each spouse has an undivided interest

in the whole, provided title to the property is held by both

husband and wife.4 Denlinger, 982 F.2d at 236. Indiana

4

In Indiana when property is divided in a divorce action, “[a]ll

property owned by either spouse before the marriage, acquired

by either spouse in his or her own right after the marriage

and before the final separation of the parties, or acquired by

the joint effort of the parties is included within the marital

estate.” Deckard v. Deckard, 841 N.E.2d 194, 200 (Ind. Ct. App.

2006) (citing IND. CODE § 31-15-7-4). Indiana courts presume

that an equal division of property is just; however, each party

has an opportunity to rebut this presumption by showing: the

contribution of each spouse to certain property; whether property

(continued...)

No. 06-2034 11

law permits a husband to convey property he owns in his

own name without the consent of his wife—“an act which

extinguishes any right the wife may have in the property

by virtue of marriage.” Id.; IND. CODE § 29-1-2-3.1. Thus,

a tax lien can attach to property held in the husband’s

name when the wife’s name is not on the title. Denlinger,

982 F.2d at 235.

Federal law determines whether the government’s

liens attach to the Assets. The primary consideration is

“the breadth of control” the taxpayer could exercise over

the property. Drye, 528 U.S. at 61 (quoting Morgan v.

Comm’r, 309 U.S. 78, 83 (1940)). For example, the Su-

preme Court has held the following constitute rights to

property: a taxpayer’s right under a life insurance policy

to compel his insurer to pay him the cash surrender value,

United States v. Bess, 357 U.S. 51 (1958); a taxpayer’s

right under state law to withdraw the whole of the pro-

ceeds from a joint bank account, Nat’l Bank of Commerce,

472 U.S. at 724-25; and a taxpayer’s right to receive the

entire value of an estate, even if he immediately elects to

pass that value on to someone else, Drye, 528 U.S. at 61.

In this case, most of the Assets are in Frank Kollintzas’s

name alone. Only the Peoples Bank checking accounts

are held by Frank and Joanna jointly, and because Frank

had the right to withdraw all of the money at any time

without Joanna’s permission, the government’s lien

attached to the full value of the account. IND. CODE 32-17-

11-22(b) (“Any multiple party account may be paid, on

request, to any one (1) or more of the parties.”); see Nat’l

Bank of Commerce, 472 U.S. at 724-25.

4

(...continued)

was acquired before the marriage, through inheritance, or as a

gift; the conduct of the parties during the marriage related to

property; and the economic circumstances of having custody

of children. IND. CODE § 31-15-7-5.

12 No. 06-2034

After the government’s liens attached and after she

filed for divorce, Mrs. Kollintzas had an opportunity to

establish her claimed interest in the Assets in the garnish-

ment proceedings before the district court. The government

conceded in its brief in the district court that “Mrs.

Kollintzas may establish ownership of all or part of these

account funds in this action by producing evidence that

she has made contribution of the funds representing

these balances.” She did not attempt to do so, however.

Instead, she argued that the property sought by the

government was marital property and as such it was “the

province of the state trial court,” not the federal court, to

determine the extent of her interest in the Assets.

But the government’s liens were perfected and the

garnishment proceedings commenced before Mrs.

Kollintzas filed for divorce; her opportunity to establish

her interest in the property sought to be garnished was

therefore in the district court. Her claim that she has a

presumptive right to half of the marital property in her

divorce action under Indiana law is subject to the gov-

ernment’s previously perfected liens, which encumber

the Assets to the extent they are part of the marital

estate. Mrs. Kollintzas asserted a generalized marital

property interest in the district court, but made no effort

to establish the amounts (if any) she contributed to the

various Assets subject to garnishment. Accordingly, the

district court properly concluded that Mrs. Kollintzas

failed to establish a claim to the Assets superior to that of

the government.

AFFIRMED.

No. 06-2034 13

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—9-5-07