Questions Presented
On June 24, 2014, the U.S. District Court for the District of Massachusetts issued
a preliminary order for the forfeiture of assets identified by the United States as
property of J~. Those assets include present and future funds held by the Social Security
Administration (SSA), payable to J~. To determine whether SSA is required to comply
with the order, you asked three questions:
1. Does the U.S. District Court’s forfeiture order compel the agency to make direct
payment of Social Security Benefits to the United States?
2. Are the past-due benefits payable to J~, but presently held by Social Security
in a non-payment status, properly identified as property subject to forfeiture?
3. If seizure is appropriate, what is the proper mechanism for releasing the funds
(given that Social Security policy does not identify a mechanism for paying past due
benefits on a record in suspense for prison confinement)?
Short Answers
The forfeiture order should not be effectuated. Although the U.S. Attorney’s Office
indicated that the order is intended to serve as a vehicle for expedited victim compensation
(and to ensure that all of the victims are compensated and stand in equal priority),
section 207 of the Social Security Act (the Act) does not permit SSA to assign benefits
based on forfeiture orders. To be exempted from the assignment prohibition in section
207, an order for victim restitution must be issued in accordance with 18 U.S.C. §
3613.
The assets at issue in this case are those benefits that were suspended from 1999
until 2013. Although J~ was identified as a member of the Martinez class, we believe
this classification may be incorrect. For that reason, we recommend that your office
seek a determination on this issue and, possibly, the amendment of J~’s record to
reflect only a “whereabouts unknown” suspense status until his incarceration in August
2013.
If the court issues a victim restitution order that complies with the Act, SSA can
release the underpayment to the court notwithstanding the “suspense” status. To accomplish
this, your office should follow the steps discussed in detail below.
Background
On November 14, 2013, the U.S. District Court for the District of Massachusetts issued
an Order of Forfeiture (Money Judgment) against the defendant, J~, in the amount of
$25,162,800, after he was found guilty of multiple counts of racketeering. Under Rule
32.2(e) of the Federal Rules of Criminal Procedure, the United States moved to amend
the Money Judgment, to request the forfeiture of substitute property to satisfy the
Money Judgment.
On June 24, 2014, the court issued the order that is the subject of this opinion—the
Preliminary Order of Forfeiture for Substitute Assets in Partial Satisfaction of Money
Judgment (the Order). The Order identified substitute assets that may be forfeited
in satisfaction of the original Money Judgment, including “all funds held by the Social
Security Administration, payable to J~, and all future payments by the Social Security
Administration payable to J~.”
The potential funds identified in the Order are the Social Security retirement benefits
that were suspended after J~’s disappearance in 1999 until he was incarcerated in
2013. He began receiving retirement benefits in October 1991. Those benefits were
paid without interruption until February 1999 when the payments were suspended because
J~’s whereabouts were unknown. On June 1, 2005, SSA received three homicide warrant
reports from the National Crime Information Center. In December 2009, SSA sent a notice
to J~’s last known address, informing him that because he was a member of the Martinez
class, his outstanding arrest warrants would no longer preclude payment of his benefits,
but that he would need to provide information in order for the benefits to be reinstated.
Following his apprehension, J~’s benefits remained suspended. After his conviction
and subsequent imprisonment, his Social Security record was amended to reflect a new
suspense status: prison confinement. Thus, the benefits at issue may include the following:
Applicable Law
Section 207 of the Act strictly limits the assignment or transfer of benefits 42 U.S.C.
§ 407. It states;
The right of any person to any future payment under this subchapter shall not be transferable
or assignable, at law or in equity, and none of the moneys paid or payable or rights
existing under this subchapter shall be subject to execution, levy, attachment, garnishment,
or other legal process, or to the operation of any bankruptcy or insolvency law. Id.
Any exemption from this law must expressly reference Section 207. Id.
SSA currently recognizes just three exemptions: (1) garnishments for child support
or alimony (42 U.S.C. § 659); (2) garnishments for victim restitution (18 U.S.C. §§
3613(a), 3663, 3663A, and 3664); and (3) levies for unpaid federal taxes (26 U.S.C.
§§ 6331 and 6334). See also POMS GN 02410.001.B.
At issue here is the second exemption, garnishment for victim restitution. Under 18
U.S.C. § 3613(c), certain types of judgments (including orders of restitution made
pursuant to 18 U.S.C. §§ 3663 (Order of Restitution), 3663A (Mandatory Restitution
to Victims of Certain Crimes), or 3664 (Procedure for Issuance and Enforcement of
Order of Restitution)) are exempt from the assignment prohibition in section 207.
Although it is not an exemption recognized by SSA, the United States can seek forfeiture
of a criminal defendant’s property if he is found guilty. FED. R. CRIM. P. 32.2. If
the government seeks forfeiture of specific property, the court must determine whether
the government has established the requisite nexus between the property and the offense.
FED. R. CRIM. P. 32.2(b)(1)(A), see also 21 U.S.C. § 853(a). If, as in this case, the government seeks a personal money judgment,
the court must determine the amount of money that the defendant will be ordered to
pay. FED. R. CRIM. P. 32.2(b)(1)(A). The United States may also move to amend a forfeiture
order to substitute property to satisfy the original order. FED. R. CRIM. P. 32.2(e).
Substitution orders are sought in situations where the property identified in the
original order cannot be located, has been transferred to a third party, is beyond
the reach of the court’s jurisdiction, has diminished in value, or has been commingled
with other assets that cannot be divided easily. 21 U.S.C. § 853(p). A preliminary
forfeiture order authorizes the United States to, inter alia, seize the property subject to forfeiture. FED. R. CRIM. P. 32.2(b)(3).
Analysis
1. Does the Order compel the agency to make direct payment of Social Security benefits
to the United States?
No. The agency lacks the authority to comply with the order because an order for criminal
forfeiture is not a recognized exception to the anti-assignment rule under section
207.
Section 207 strictly prohibits the assignment or transfer of Social Security benefits
or rights unless an express exception has been established by Congress. See 42 U.S.C. § 407. While an order of victim restitution is one of the exceptions to
the assignment prohibition, a criminal forfeiture order is not. See 18 U.S.C. §§ 3613(a), 3663, 3663A, and 3664. See also POMS GN 02410.001.B.
Restitution and forfeiture are distinct asset collection mechanisms. Criminal forfeiture
is governed by 21 U.S.C. § 853, while restitution under the Mandatory Victims Restitution
Act is governed by 18 U.S.C. § 3613(c), as “a lien in favor of the United States on
all property and rights to property of the person fined.” The two avenues of asset
collection also serve different purposes. “Congress conceived of forfeiture as punishment
for the commission of various [crimes].” Libretti v. U.S., 516 U.S. 29, 39 (1995). The purpose of restitution, on the other hand, is not to
punish the defendant, but to make the victim whole again, by compensating for their
losses, and restoring victims to their original state of wellbeing. See, e.g., U.S. v. Hunter, 618 F.3d 1062, 1064 (9th Cir. 2010), U.S. v. Simmonds, 235 F.3d 826, 831 (3d Cir. 2000). Notably, both collection vehicles draw from the
same pool of the defendant’s assets.
After communicating with the U.S. Attorney’s Office, we understand that they have
entered into an agreement with the victims in this case to turn over all assets collected
through forfeiture. Although the order of forfeiture appears to serve as a vehicle
for the payment of victim restitution in this case, forfeiture orders are not a recognized
exception to section 207. For that reason, despite the intentions of the U.S. Attorney,
SSA still lacks the authority to comply with the Order.
If the court issues an order of victim restitution, however, SSA will be compelled
to comply, provided the order references either 18 U.S.C. § 3613 or 3613(a). See POMS GN 02410.223.B.1.a.
2. Are the past-due benefits payable to J~, but presently held by Social Security in
a non-payment status, properly identified as property subject to forfeiture?
As discussed above, any past-due benefits owed to J~ are not subject to forfeiture,
but would be subject to a lump-sum garnishment if the court issues an acceptable order
for victim restitution. As a matter of form, however, we believe that any past-due
benefits (or underpayment) would result solely from J~’s “whereabouts unknown” status,
as opposed to his inclusion in the Martinez class.
As background, the Martinez settlement agreement (approved on September 24, 2009,
by the U.S. District Court in the Northern District of California) was the product
of a nationwide class action in the case of Martinez v. Astrue, Case No. 08-CV-4735 CW. The agreement changed the types of felony arrest warrants
that SSA could use to suspend payment of Social Security benefits and directed remedies
for two distinct class members: (1) members whose benefits were suspended or denied
on or after January 1, 2007 (the “post-2006” class); and (2) members whose benefits
were suspended or denied before that date (the “pre-2007” class). POMS GN 02613.860. For members of the post-2006 class, benefits were automatically reinstated and any
withheld benefits were paid retroactively beginning with the first month of suspension.
POMS GN 02613.860.B.3. SSA sent notices to the members of this class informing them of those actions.
Id. The pre-2007 class, in contrast, received notification that the agency would stop
collecting overpayments and remove any overpayments incurred due to the its former
fugitive felon policy. POMS GN 02613.860.B.4. The notice also advised the class members that they would be given a protective
filing deadline of April 1, 2009, if they contacted SSA within six months to file
a new application for benefits. Id.
In December 2009, SSA sent a notice to J~’s last known address informing him of the
Martinez settlement agreement and explaining that his outstanding arrest warrants
would no longer preclude payment of his benefits. The notice also directed J~ to contact
SSA within 30 days to provide information necessary to resume his benefits. This notice
does not fully comport with the notices sent in connection with either the pre-2007
class or the post-2006 class. Instead, it appears to be a hybrid notice with information
pertaining to J~’s suspensions due to “whereabouts unknown” as well as his prior arrest
warrants.
Although SSA issued a notice to J~ identifying him as a member of the Martinez class,
we believe this classification may be improper. Because his whereabouts were unknown,
he could not have received notification of, nor appealed, an initial notice of suspension
based on his outstanding arrest warrants. In fact, there is no evidence that such
a notice was ever generated. For that reason, we recommend that your office seek a
determination on this question that would allow the agency to amend J~’s record to
reflect a “whereabouts unknown” suspense status until his incarceration in August
2013. If you choose to pursue this option, you should contact the Office of Income
Security Programs (within the Office of Retirement and Disability Policy). J2~ is
SSA’s lead policy expert on Martinez-related matters. If she agrees, she will assist
you with amending the record.
With only a suspension based on “whereabouts unknown” (prior to J~’s incarceration),
the calculation of a potential underpayment would be simplified. When an individual’s
benefits are suspended due to a whereabouts unknown status, the payments can be reinstated
retroactively back to the first month of suspension once the beneficiary is located.
POMS GN 02602.320.E.1. In this case, we believe the retroactive period would begin in February 1999
and continue through July 2013, when J~ was incarcerated. See POMS GN 02607.550.A.
3. If seizure is appropriate, what is the proper mechanism for releasing the funds?
Although not express in SSA’s POMS guidance, there is a mechanism for releasing underpayment
funds to comply with an order for victim restitution when the garnishee’s pay status
is in suspense (in this case, due to incarceration). After a garnishment order for
victim restitution is received and deemed proper, it is entered into the Court Ordered
Garnishment System (COGS), regardless of the ledger account file (LAF) status (e.g., current, terminated, deferred, suspense). POMS GN 02410.223.B.3.a. COGS then controls any pending garnishment orders when the beneficiary’s LAF
status changes to “current pay.” POMS GN 02410.223.B.3.b.
Because J~ is currently incarcerated, serving two life sentences plus five years,
his LAF status will never change to “current pay.” SSA can, however, release the withheld
benefits that were posted to his record for the time his whereabouts were unknown
and he was not yet confined for his crimes. These past-due benefits can be withheld
by allowing them to accrue to the Special Payment (SPC PAY) Data Line on the Master
Beneficiary Record (MBR). These past due benefits will allow garnishment to occur.
M~ in the Office of Public Service and Operations Support can provide the payment
center with instructions on how to process the case without removing J~’s benefits
from prisoner suspension and ensure that garnishment also begins for victim restitution.
M~ can contact J2~ for additional processing information on this case, if required.
Additionally, based on a discussion with R~ from the Office of Income Security Programs,
SSA’s policy lead on garnishment questions, we learned that the agency generally makes
these types of payments in the following way:
If the lump sum underpayment is $500 or more, COGS will withhold the Federal Consumer
Credit Protection Act (CCPA) Limit from the lump sum.
COGS will then generate an Alert (OG10) to the Payment Center to contact the court
for instructions on how much of the lump sum they would like to receive.
The beneficiary will then be paid the amount of the lump sum that exceeds the Federal
CCPA Limit.
COGS will automatically stop all pay-over (including the regular monthly garnishment
payment) to the Court until the lump sum issue is resolved.
In this case, however, R~ has contacted the Office of Systems to determine if there
is a way to bypass the CCPA limitations to allow SSA to garnish all (or most of) the
lump sum amount for victim restitution. For additional information or assistance with
this process, please contact R~
Conclusion
The preliminary forfeiture order should not be effectuated. The assets at issue in
this case are the benefits that were suspended from 1999 through 2013. We believe
this underpayment is based solely on a “whereabouts unknown” status and recommend
that you seek a determination on this question and an amendment to the record. If
the court issues a victim restitution order that complies with our rules, there is
a mechanism that will permit SSA to release the underpayment, while J~’s record remains
in a suspended status.
Christopher Michaels
Regional Chief Counsel (Acting)
By: Candace Lawrence
Assistant Regional Counsel