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Federal District Court Orders the United States Secret Service to Return Over One Million in Embezzled Tax Refunds to a Federal Bankruptcy Trustee

Sat 27th Mar 2010, Case Successes

On a motion brought by Bienert | Katzman, a federal district court judge in San Diego, California, ordered the return of over $1 million in embezzled tax refunds belonging to the bankruptcy estate of SLE Metal, Inc., which had been seized by the United States Secret Service in March 2010. The Secret Service held the funds for over three years, despite several requests for return of the funds by the federal bankruptcy Trustee of the company. The Trustee then obtained a court order retaining Bienert | Katzman as her Special Counsel to pursue the recovery of the seized funds. The firm was selected by the Trustee because of Steven Jay Katzman’s prior experience, both as coordinator of the Bankruptcy Fraud Task Force for the U.S. Attorney’s Office in Los Angeles and as the United States Trustee for five Judicial Districts, including all of Southern California, Hawaii, Guam and the Mariana Islands.

Taking the position that the Trustee had an interest in the embezzled funds superior to any claim of the government, Katzman and Anne Uyeda of the firm utilized a provision of the federal rules of criminal procedure to secure the return of the funds.  As a result, in fewer than four months after the order approving their employment, Bienert | Katzman were able to obtain an order for turnover of the funds to the Trustee. “The case presented a novel issue in a very common scenario, where both the interests of a federal criminal proceeding and a bankruptcy case overlap. We are happy that we were able to achieve a successful result for our client by securing the return of the embezzled funds to the Trustee.  We are also thankful for the support of the U.S. Attorney’s Office and Wells Fargo Bank, who both cooperated in response to our request for the return of the funds to the Trustee,” said Steve Katzman, partner with Bienert | Katzman.