21 Jun California Receiverships Imposed in White Collar Crime Cases
Both California state courts and federal courts often impose receiverships in civil, administrative and criminal cases. This post will be limited to discussing California state law regarding receiverships.
What is a Receivership?
Generally, a receivership removes the property or business from the control of its owners during litigation proceedings. Receiverships are more common in complex civil cases and are governed by California Civil Code section 564. For example, when a corporate partnership involves a partner who is stealing money and the corporation is on the road to dissolution, a lawsuit may be filed and a receiver appointed by the court to preserve the assets and the status quo of the corporation until the lawsuit is resolved. There are other types of situations listed in the Civil Code specifying when a receiver may be appointed, but the corporate receiverships are one of the most common. In 1995, the California legislature expanded the use of receiverships, and codified the use of receivers in aggravated white collar crime cases.
Penal Code Section 186.11 Receiverships – “Freeze and Seize” Law
The “Freeze and Seize Law” of Penal Code section 186.11 allows a criminal court in certain white-collar criminal cases to take possession of assets under a defendant’s control, and preserve them for the payment of restitution after the guilt phase is determined. Specifically, a defendant must have allegedly committed two or more related felonies, a material element of which is fraud or embezzlement, which involve a pattern of related felony conduct, and the pattern of related felony conduct involves the taking of, or results in the loss by another person or entity of, more than one hundred thousand dollars ($100,000). This is alleged as an Aggravated White Collar Crime Enhancement on the charging document pursuant to Penal Code section 186.11, and the receivership is usually sought by the District Attorney’s office at the time the criminal charges are filed.
Once a Receiver is appointed, he or she is then authorized to enter, possess, maintain, preserve, protect, manage, insure, administer and liquidate any of the property, and to demand and receive any funds, accounting, statements of account, evidence of deposit, withdrawal, transfer of funds, and any other evidence of the disposition of any funds or other assets. Depending on the circumstances, this can be a very difficult task, especially if any of the defendants created numerous LLC’s to take title to any of the assets. The more complicated the case, the longer the receivership is usually in place.
Many times, the Receiver will have to undergo his or her own investigation regarding the assets and take all actions necessary, in order to determine if all the assets have been turned over. This may require the Receiver to employ additional professionals (forensic accountants, certified fraud specialist, specialized attorneys, etc.) in order to assist with the investigation and related proceedings. The Receiver is usually required to prepare and submit periodic statements to the court, reflecting the Receivers fees and administrative costs for operating and administering the Receivership Estate. The Court then has the ultimate approval and confirmation of the report and fees.
In Orange County, California, if a person is charged with the Aggravated White Collar Crime enhancement, and a receivership seems imminent, he or she should immediately seek an Orange County criminal attorney who is familiar and well versed in handling white collar crime cases involving receiverships. For more information regarding aggravated white collar crime defense and/or receiverships contact the Kenney Legal Defense Corporation at (855) 505-5588 or visit the firm’s website.