Legal Definitions - L–CLAIM PROCEEDING

An L-Claim Proceeding is a specific type of legal hearing conducted under the Racketeer Influenced and Corrupt Organizations Act (RICO). Its primary purpose is to allow a third party, who is not the defendant in a criminal case, to assert a legal interest in property that the government has ordered to be forfeited as a result of a RICO conviction. The "L" in L-Claim refers to subsection (l) of RICO's penalty provision, which outlines this specific procedure.

This proceeding ensures that only property legally belonging to the convicted defendant is ultimately seized by the government, thereby protecting the rights of innocent third parties who may have a legitimate claim to some of the forfeited assets. It is important to note that an L-Claim Proceeding is not for general creditors seeking to collect debts, nor is it designed to divide assets among multiple competing claimants. Instead, it is specifically for a party claiming a direct, legal ownership interest in specific forfeited property.

Here are some examples illustrating an L-Claim Proceeding:

• Jointly Owned Property: Mr. Davies is convicted of racketeering activities under RICO, and the court orders the forfeiture of his luxury condominium. However, the condominium is legally co-owned by Mr. Davies and his sister, who had no involvement in the criminal enterprise and purchased her share with legitimate, independently acquired funds.

  In this scenario, Mr. Davies's sister can initiate an L-Claim Proceeding. She would present evidence, such as purchase agreements, mortgage documents, and bank records, to demonstrate her legitimate, legal ownership interest in half of the condominium. The L-Claim hearing would then determine if the sister's share of the property should be protected from forfeiture, ensuring that only Mr. Davies's criminally derived or involved portion is seized by the government.

• Property Held in Trust: Ms. Chen, a financial advisor, is convicted of operating a fraudulent investment scheme under RICO, leading to the forfeiture of several high-value properties she managed. One of these properties is a commercial building that Ms. Chen held in trust for her elderly uncle, who is the true legal owner and beneficiary of the trust. Ms. Chen had no personal ownership interest in the building; she merely managed it on her uncle's behalf.

  Ms. Chen's uncle, or his legal representative, can file an L-Claim. He would need to provide documentation, such as the trust agreement and property deeds, proving that the commercial building was legally held in trust for his benefit and was not Ms. Chen's personal asset or involved in her criminal scheme. The L-Claim Proceeding would allow the court to recognize the uncle's legitimate ownership and prevent the forfeiture of his property.

• Leased Equipment: A construction company owner is convicted of money laundering and extortion under RICO, resulting in a court order to forfeit all company assets, including several pieces of heavy machinery. One of these excavators, however, is not owned outright by the company but is leased from "Industrial Equipment Leasing Solutions" under a long-term agreement.

  Industrial Equipment Leasing Solutions can initiate an L-Claim Proceeding. They would present the lease agreement and other ownership documents to the court, demonstrating that they are the true legal owner of the excavator, not the convicted company owner. The L-Claim would allow the leasing company to reclaim its property, preventing it from being forfeited as part of the defendant's assets, as they are an innocent third party with a direct legal interest.