Connecticut Law Review Online The Online Presence of Connecticut Law Review

Eyes Wide Shut: The Perils of Failing to Take Action to Undo Fraudulent Transfers Before Entry of a Restitution Order

The Mandatory Victims Restitution Act enables the Federal Government to recover statutorily mandated restitution from criminal offenders to compensate the victims of fraud and other corporate crimes.  According to a report issued by the Government Accountability Office, the Department of Justice lacks the statutory authority to obtain pre-conviction restraints on funds in order to satisfy future restitution orders.  Therefore, the Department of Justice’s Financial Litigation Units, charged with recovering criminal debts, often wait to initiate recovery actions until a restitution order is entered.  By waiting for the entry of a restitution order, the Government allows criminal offenders to fraudulently conceal funds in offshore accounts or shell companies and fraudulently transfer funds to friends and family.  This substantially limits the Government’s ability to recover restitutionary interests.  This Article argues that the Government and corporations victimized by fraud should not wait for the entry of restitution orders.  Instead, the Government and corporations can, and should, act immediately to undo and recover fraudulent transfers under the Federal Debt Collection Procedure Act—and in Connecticut, the Connecticut Uniform Fraudulent Transfer Act—as soon as they know about a fraudulent transfer.  Because the statute of limitations on recovery cannot be tolled or extended under either statute, the Government and corporations cannot simply shut their eyes and wait for a restitution order.  Instead, they should take immediate action to address past, present, and future fraudulent transfers.

:: View PDF