United States v. Dominick Poeta

Citation: Not availableDocket: 08-4039

Court: Court of Appeals for the Seventh Circuit; February 1, 2010; Federal Appellate Court

Original Court Document: View Document

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The United States Court of Appeals for the Seventh Circuit dealt with a case involving the government’s attempt to recover financial obligations from Adam R. Resnick, who pled guilty to wire fraud related to a check-kiting scheme that resulted in the failure of Universal Federal Savings Bank. Resnick was sentenced to 42 months in prison and ordered to pay approximately $10.5 million in restitution, primarily to the FDIC, which had covered the bank's losses. Due to Resnick's insolvency, the government sought to recover funds from Domenic Poeta, a bookie who received significant payments from Resnick to settle illegal gambling debts.

After a bench trial, the district court ruled in favor of the government, awarding $848,197.63 to be collected from Poeta, which included $647,211.00 from checks drawn by Resnick to Poeta and prejudgment interest. The government utilized the Federal Debt Collection Procedure Act and common-law theories of fraudulent transfer and unjust enrichment. Poeta appealed the judgment, but the court affirmed the lower court's decision. The proceedings included Poeta invoking his Fifth Amendment right against self-incrimination during a court examination about his gambling activities and connections to Resnick.

The government filed a petition against Poeta, alleging that Resnick defrauded Universal of about $10.5 million, using some funds to settle Poeta's illegal gambling debts. The petition claimed that transfers from Resnick to Poeta were fraudulent due to lack of consideration (illegal gambling contracts) and Resnick's insolvency at the time. It alleged intentional and constructive fraudulent transfers under 28 U.S.C. 3304(b)(1)(A) and (B)(ii), and later added a claim for unjust enrichment, seeking $647,211 plus prejudgment interest.

Poeta's response did not deny relevant facts; he either admitted them or claimed insufficient information, invoking his Fifth Amendment rights. With minimal factual dispute, the government sought a judgment on its petition, while Poeta moved to strike, arguing Resnick lacked rightful ownership of the transferred funds and that he hadn’t received adequate discovery.

A trial was held on June 6, 2008, where the government presented testimony and exhibits; Poeta called three witnesses but did not testify. The district court ruled in favor of the government on July 23, 2008, awarding $848,197.63, which was initially written on July 31 but vacated on August 6 for further findings. Poeta submitted objections and proposed alternative findings, claiming a setoff for gambling winnings paid to Resnick and later raised defenses of contributory negligence and failure to mitigate damages.

On September 24, 2008, the district court found Poeta liable for constructive fraudulent transfer and unjust enrichment, without deciding Resnick's ownership of the funds. A new judgment of $848,197.63 was entered. Poeta's subsequent motion to alter or amend the judgment, asserting issues of ownership and due process violations, was denied, and he has appealed. For establishing Poeta’s liability under the FDCPA, the government needed to demonstrate that Resnick made the transfer without receiving equivalent value and intended to incur debts beyond his ability to pay.

Payments made by Resnick to Poeta were deemed to satisfy the first element of a fraudulent transfer claim due to the illegality of the gambling obligation, which is void under Illinois law. The second element was also met, as Resnick was aware that he was incurring debts he could not repay while defrauding Universal for millions, primarily to support his gambling addiction. While Poeta does not dispute these elements, he argues that no "transfer" occurred under the FDCPA because Resnick never legally owned the funds he paid, having acquired them through fraud. The FDCPA stipulates that a "transfer" is not valid until the debtor has rights in the asset transferred. 

Poeta contends that Resnick was never the legal owner of the funds moved from Universal’s account, thus exempting the transfers from the FDCPA's provisions. However, the court clarified that the FDCPA does not hinge on legal ownership but rather on whether Resnick had "rights in the asset transferred." Despite the fraudulent means through which Resnick obtained the funds, he possessed the authority to transfer them, which was not illegal in itself. The court found that Resnick’s ability to draw from the Universal account and transfer the money satisfied the requirement of having rights in the asset. 

Furthermore, the court rejected the notion that the rights of fraud victims could diminish Poeta’s liability, emphasizing that the statute aims to protect victims rather than grant greater rights to a bookie receiving stolen funds. As Resnick had the legal right to draw from the account, his payments to Poeta are encompassed by the FDCPA, and Poeta is liable for these constructively fraudulent transfers. The court did not address the district court's alternative unjust enrichment theory. 

In addition, Poeta contested the use of supplementary proceedings for the fraudulent transfer and unjust enrichment claims, asserting he should be allowed to defend himself in a separate civil action with full procedural rights. This argument was first raised in a motion to alter or amend judgment after the district court's ruling against him.

Poeta's late procedural objections are deemed waived, preventing him from challenging the district court's decisions on appeal. Under Federal Rule of Civil Procedure 59(e), a motion to alter or amend judgment is limited to addressing manifest errors or newly discovered evidence, and cannot be used to rectify prior procedural failures or introduce new arguments not previously presented. The court reviewed Poeta's Rule 59(e) motion with deference and found no abuse of discretion in its denial. Poeta raised objections to supplemental proceedings only after a final judgment was entered, failing to demonstrate a violation of his due process rights, as he had sufficient notice and opportunity to present his case. His claim of due process infringement due to the inability to implead others was unfounded, as those individuals were not connected to the money in question, which was directly linked to Resnick’s fraudulent payments to Poeta for illegal gambling debts. Poeta's assertions about lacking certain evidence were deemed irrelevant to his case, as he did not contest the fact of receiving $647,211 in illegal payments. Additionally, Poeta's claim of being denied a jury trial is invalid; he did not serve a written demand for a jury trial as required by Rule 38(b) within the specified timeframe, thus waiving his right. The court's intent to make factual determinations was evident, further solidifying his waiver of a jury trial opportunity.

The district court rejected Poeta's affirmative defenses of contributory negligence and failure to mitigate damages, determining that these defenses were introduced too late, specifically after the court had indicated it would rule against him. The court did not abuse its discretion in this decision. Poeta also sought to set off his judgment by claiming payments he made to Resnick from his winnings against payments he received for losses. However, both federal and Illinois law do not allow such offsets for illegal gambling debts. Poeta argued for "equitable consideration" of these payments, referencing the Supreme Court case United States v. Santos, which interpreted "proceeds" in a money laundering context. The evidence Poeta provided to support his claims consisted of hearsay from a fictional book by Resnick, which did not substantiate his assertion of having paid $2.2 million. The book indicated that any payments would have originated from an offshore operation, not Poeta's funds. In contrast, the court noted that any possible offset might only amount to $120,000, corresponding to two smaller payments. The Illinois Loss Recovery Act voids illegal gambling transfers and allows for the recovery of total losses, not net losses, reinforcing that Poeta's setoff defense was barred. Ultimately, the district court's judgment was affirmed.