Judge: Transit owner unlikely to get back forfeited property

U.S. Magistrate Judge Joi Elizabeth Peake told Greensboro businessman Roderick Jessup on Wednesday she is unlikely to return nearly $5 million in cash, 40 vehicles, and four properties to him, or to dismiss the federal government’s civil asset forfeiture case against him despite his attorneys’ claim the government acted in bad faith.

Peake also announced at the end of a hearing in U.S. District Court for the Middle District of North Carolina that she plans to grant a motion by government prosecutors to freeze any civil action in the case so they can continue developing a criminal case. She said her intent is to file a written order within 30 days.

Jessup’s lawyer Robert Higdon argued against such a ruling. It empowers the government to seize private property, then get a court order to block indefinitely the owner’s attempt to reclaim it the property while prosecutors take time to build a parallel criminal case.

This order deprives a person of constitutional rights against unlawful search and seizure, and affording due process, and sets a bad controlling precedent for all future Middle District cases, he warned.

The government contends Jessup committed Medicaid fraud and money laundering at his medical transport business, Gate City Transportation, which served hundreds of low-income, chronically ill clients by providing thousands of trips a month to medical appointments.

The government has yet to charge him with a crime 19 months after the February 2015 seizures shut down his 50-employee business.

Even though Jessup and his wife are slated to be evicted from their house on Sept. 8, “because they are destitute, and they need those funds” to live, Peake said, that is not a “sufficient argument” to return the disputed property.

“I suspect he will lose his home,” Higdon said outside the federal courthouse in Winston-Salem. “That’s not the America that I know.”

When asked if he was disappointed in the judge’s pending order, he replied: “The government has the upper hand in asset forfeiture cases … That is why this is being litigated all over the country,” and legislation is making its way through Congress to rein in government overreach in seizing private property without filing charges.

Assistant U.S. Attorney Bob Hamilton admitted the government has yet to complete an investigation that could lead to an indictment.

Complicating the investigation is the need to pore through thousands of pages of billing and other documents, and determining who advised Gate City on how to bill Medicaid, Hamilton said. The transportation service used several outside billing companies.

The government claims the company billed for ineligible Medicaid reimbursement under a code for ambulances, rather than passenger vans. And there are questions whether multiple billings were submitted for all the passengers on multi-passenger vans on the same trip.

“We’re making progress,” and hope to finish “in a timely fashion,” Hamilton said.

Assistant U.S. Attorney Lynne Klauer said if Peake did not stay the civil proceedings, the defense could use discovery that could divulge overlapping details of the criminal case, damaging the government’s attempts to establish that crimes were committeed.

Higdon argued that the government has had more than enough time to establish a criminal case, if one exists.

“They know, we know, and you know this investigation was going on long before” the property seizure, and federal prosecutors claimed in its filings for seizure authority they already had probable cause, Higdon said.

“The investigation had real life, and progress at that point,” Higdon said. “They’ve already, in effect, had a 19-month stay.”

Should Peake issue a stay of the property recovery civil proceedings to protect a criminal case, Higdon said, that would be the future standard in “every [criminal] investigation where there is a parallel civil case, and the law doesn’t contemplate that.”

But Peake said one question still unresolved is whether Jessup is entitled to get back his property because the government claims his earnings were gained improperly through ineligible Medicaid reimbursements.

Defense attorney Camden Webb argued that the government showed “callous disregard” for Jessup’s rights by filing court papers on the asset forfeiture but never informing him or his lawyers until Jessup sought return of his property. He argued that hiding its legal actions and failure to prosecute violates a number of rules on timelines, and merits dismissal of the case.

“We don’t have a hard and fast date” on setting time limits for prosecutorial action in these cases, Peake said, and “it’s hard” for her to see a technical violation by the government that merits dismissal.