Summer 2006 • Issue 22, page 5

Are receivers being appointed in criminal cases? What is the authority for appointing a receiver in such cases? Should I be lobbying my local district attorney for more work?

By Davidson, Peter*

Q: I have heard receivers are sometimes appointed in criminal cases. Is that correct? What is the authority for appointing a receiver in such cases? Should I be lobbying my local district attorney from more work?

A: There are two different statutes which authorize the appointment of a receiver in criminal cases. Penal Code §186.11 provides for the appointment of a receiver, at the request of a prosecuting agency, where a complaint or indictment charges a person committed two or more 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 more than $100,000.00 (known as the “aggregated white collar crime enhancement”) and it is necessary to preserve property or assets for the payment of restitution to victims or fines imposed by the section.

The petition for the appointment of the receiver must allege that the defendant has been charged with two or more qualifying felonies, is subject to the “aggregated white collar crime enhancement” and needs to identify the criminal proceeding and assets and property to be affected by the order.

One interesting aspect of the statute is that notice of the petition needs to be served by personal service or registered mail on every person who may have an interest in the property specified in the petition and must be published for three (3) successive weeks in a newspaper of general circulation. The receiver appointed under this section can upon motion sell the property he is appointed receiver over. The statute also provides how the assets the receiver takes possession of are to be distributed.

The other section which authorizes the appointment of a receiver in criminal cases is Penal Code §186.6. It provides for the appointment of a receiver to take possession of, care for, manage, and operate assets and property where the assets are subject to forfeiture due to “criminal profiteering activities” as defined in Penal Code §186 et seq. This section also has certain notice requirements requiring notice to be provided to interested parties.

There is almost no case law regarding the appointment of a receiver under these sections. One reported decision, decided late last year, concerned how claims to the funds the receiver has taken possession of are to be handled. People v. Semaan, 35 Cal. Rptr. 3d 382 (2005). The Supreme Court granted review earlier this year and, therefore, that decision is now of no precedental value.

Another recent case is People v. Stark, 31 Cal Rptr. 3d 669 (2005). The case has a general discussion of Penal Code §186.11 and its purposes. The case focuses on the receiver’s sale of assets in a criminal receivership case. The court notes that no case law has been developed under the criminal statute since it was enacted ten years ago and that the law governing sales by receivers in civil actions should govern sales by receivers in criminal actions.

With regard to your final question, you probably should lobby your local district attorney to make more use of this remedy. In both cases discussed above, the receiver was able to liquidate a number of valuable assets and distribute funds to the defrauded entities.

*PETER A. DAVIDSON, with Moldo Davidson Fraioli Seror & Sestanovich LLP located in Los Angeles, is a receiver and an attorney who specializes in representing receivers in state and federal court.