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United States v. Sayyed

United States Court of Appeals, Seventh Circuit

July 6, 2017

United States of America, Plaintiff-Appellee,
Rafi Sayyed, Defendant-Appellant.

          Argued February 22, 2017

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11 CR 625-1 - Gary Feinerman, Judge.

          Before Bauer and Williams, Circuit Judges, and DeGuilio, District Judge. [*]

          Williams, Circuit Judge.

         Rafi Sayyed was ordered to pay $940, 000 in mandatory restitution to the American Hospital Association after pleading guilty to mail fraud. The United States sought to collect part of the restitution with approximately $327, 000 contained in Sayyed's retirement accounts.

         The district court granted the government's motion for turnover orders. On appeal, Sayyed maintains that the district court erred in failing to find that his retirement funds qualify as "earnings" subject to the 25% garnishment cap under the Consumer Credit Protection Act. We disagree. Because the garnishment cap only protects periodic distributions pursuant to a retirement program and the government may reach Sayyed's present interest in his retirement funds, the district court properly granted the government's turnover motion.

         I. BACKGROUND

         From 2003 to 2006, while employed as Director of Application for the American Hospital Association ("AHA"), Rafi Sayyed directed overpriced contracts to companies in exchange for kickbacks. For his crimes, Sayyed plead guilty to one count of mail fraud, in violation of 18 U.S.C. § 1341, was sentenced to three months' imprisonment and ordered to make restitution payments to the AHA in the amount of $940, 450.00, pursuant to the Mandatory Victims Restitution Act. 18 U.S.C. § 3663A. As of November 20, 2015, Sayyed still owed $650, 234.25.

         In post-conviction proceedings, the United States sought to enforce the restitution judgment pursuant to 18 U.S.C. § 3613, which permits the government to enforce a restitution judgment "in accordance with the practices and procedures for the enforcement of a civil judgment." The government served citations to The Vanguard Group ("Vanguard") and Aetna, Inc. ("Aetna") to discover assets in Sayyed's retirement accounts. After receiving answers, the government filed a motion for turnover orders alleging that the companies possessed retirement accounts with approximately $327, 000 in non-exempt funds that could be used to satisfy the judgment. Sayyed responded to the government's motion arguing that his retirement accounts were exempt "earnings" subject to the 25% garnishment cap of the Consumer Credit Protection Act (the "CCPA").

         The district court granted the government's motion, finding that because Sayyed, who was 48-years-old at the time, had the right to withdraw the entirety of his accounts at will, the funds were not "earnings" and so were not exempt under the CCPA. The district court directed Vanguard and Aetna to pay the Clerk of Court the liquidated value of the funds and ordered the Clerk to reserve a portion of the funds in escrow for the income tax consequences of the early withdrawal.

         II. ANALYSIS

         "The district court's turnover order is a final judgment, which we review de novo." Maker v. Harris Trust & Sav. Bank, 506 F.3d 560, 561 (7th Cir. 2007) (quotation and citation omitted). We have previously held that a district court may enforce restitution fines against a defendant's retirement account, pursuant to 18 U.S.C. § 3613(a). See United States v. Lee, 659 F.3d 619, 621 (7th Cir. 2011); United States v. Hosking, 567 F.3d 329, 335 (7th Cir. 2009). 18 U.S.C. § 3613(a) states that "a judgment imposing a fine may be enforced against all property or rights to property of the person fined." However, enforcement is subject to Section 303 of the CCPA, which creates a garnishment ceiling of 25% of a debtor's disposable earnings for a week. 18 U.S.C. § 3613(a)(3); see 15 U.S.C. § 1673(a)(1).

         Sayyed contends that the funds in his retirement accounts meet the CCPA's definition of "earnings" and so are subject to the 25% garnishment cap. Sayyed does not dispute the district court's conclusion that he has a present right to receive the entire balance of his retirement accounts. Instead, he offers three arguments to assert that the CCPA's garnishment cap applies to his retirement accounts. First, he asserts that Lee, 659 F.3d 619, held all retirement funds are "earnings" subject to the garnishment cap. He then argues that even if lump-sum distributions from a retirement account are not subject to the garnishment cap, the government must wait until he reaches retirement age and elects a form of distribution (i.e., lumpsum distribution or periodic payments) before deciding whether the CCPA's garnishment cap applies in his case. Finally, Sayyed contends that his retirement funds meet the definition of "earnings" because the accounts are funded directly by his earned wages. These arguments fail for the reasons explained below.

         A. Not all retirement funds are ...

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