If a person were to steal $10,000 from a convenience store and gamble with it, winning $500,000.
And later they were caught, would the government only claw back the $10,000 or also the $500,000?
Would there be any legal way of "saving the ill-gotten gains"? And has there ever been any notable historical cases similar to this?
There would be a civil remedy of the victim in a lawsuit requiring the thief to disgorge the profits. One form of this is to have a court declare that the stolen funds are held in constructive trust.
A 2018 trial court decision in New York State sets forth some of the relevant case law, although focusing on abuses of confidential relationships through undue influence, rather than outright theft:
Turning to the cause of action for unjust enrichment, such a cause of action arises when one party possesses money or obtains a benefit that in equity and good conscience they should not have obtained or possessed because it rightfully belongs to another ***." (Mente v. Wenzel, 178 AD2d 705, 706; see, Strong v. Strong, 277 AD2d 533). To state a claim for unjust enrichment, the plaintiff must allege "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered ***." (Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173, 182 [brackets and internal quotation marks omitted]; Georgia Malone & Co., Inc. v. Rieder, 19 NY3d 511, 516.). In the case at bar, the plaintiff produced sufficient evidence to show that there are genuine issues of fact to be tried regarding the elements of a cause of action for unjust enrichment.
Turning to the cause of action for the imposition of a constructive trust, in order to have a constructive trust imposed, a plaintiff generally must "plead and prove four essential elements: (1) a confidential or fiduciary relationship, (2) a promise, express or implied, (3) a transfer in reliance thereon, and (4) unjust enrichment caused by the breach of the promise ***." (Valvo v. Spitale, 305 AD2d 668, 669; Sanxhaku v. Margetis, 151 AD3d 778; see, Sharp v Kosmalski, 40 NY2d 119; Lipton v. Donnenfeld, 5 AD3d 356; accord, Ernest Edward Badway New York Causes of Action: Elements & Defenses 2018 (New York Law Journal publishers 2018) (containing excellent discussion).
In Cullen v. Torsiello, 156 AD3d 680 (2nd Dept. 2017), the Second Department, reversing the court below, recently emphasized "the broad and flexible constructive trust doctrine."
In New York, "a constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest." Sharp v. Kosmalski, 40 NY2d 119 (1976) (alteration and internal quotation marks omitted). Constructive trust is "the formula through which the conscience of equity finds expression," and thus "[w]hen property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee." Simonds v. Simonds, 45 NY2d 233 (1978) (internal quotation marks omitted).
The purpose of the constructive trust doctrine "is to prevent unjust enrichment, although unjust enrichment does not necessarily implicate the performance of a wrongful act." Counihan v. Allstate Ins. Co., 194 F.3d 357, 361 (2nd Cir. 1999). Such "[u]njust enrichment results when a person retains a benefit which, under the circumstances of the transfer and considering the relationship of the parties, it would be inequitable to retain." Id.; see also, Simonds, 45 N.Y2d 233 ("What is required, generally, is that a party hold property under such circumstances that in equity and good conscience he ought not to retain it." (internal quotation marks omitted)).
Four factors have been set forth for evaluating whether a constructive trust should be imposed: "(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment." Sharp, 40 NY2d 119. These factors, however, are only guidelines, as the "constructive trust doctrine is not rigidly limited." Simonds, 45 NY2d 233; see also Counihan v. Allstate Ins. Co., 194 F.3d at 362 ("[W]e have observed that, although these factors provide important guideposts, the constructive trust doctrine is equitable in nature and should not be rigidly limited." (alteration and internal quotation marks omitted). The New York Court of Appeals aptly and eloquently stated that the applicability of the constructive trust doctrine "is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them." Latham v. Father Divine, 299 NY 22, 27 (1949).
Almost seventy years later, those memorable words in Latham v. Father Divine still ring true. As long as the unprincipled knavery and manipulative misconduct of deceitful predators continue to victimize the trusting, vulnerable, and unwary, courts are adept at using the constructive trust doctrine to combat such betrayal, greed, and treachery. "The doctrine of constructive trust is not limited to that subspecies, but is given broad scope to flex in response to all human implications of the transaction, to remedy whatever knavery ingenious wrongdoers can invent, to give expression to the conscience of equity, and to satisfy the demands of justice." Nastasi v. Nastasi, 26 AD3d 32, 38 (2nd Dept. 2005). "The constructive trust doctrine is given broad scope to respond to all human implications of a transaction in order to give expression to the conscience of equity and to satisfy the demands of justice." Kaprov v. Stalinsky, 145 AD3d 869, 872 (2nd Dept. 2016), lv. to appeal denied, 29 NY3d 913 (2017).
For the purposes of this cause of action, a confidential relationship can exist between family members (see, Igneri v. Igneri, 125 AD3d 813 [uncle and niece]), and defendant Meta himself alleges that the plaintiff's father regarded him as family. "Over time, I became like family with Johnny and his wife." In any event, the doctrine of constructive trust " is available to prevent unjust enrichment in a wide range of circumstances" and "[t]he factors are not rigidly applied but are flexible, and a constructive trust will be imposed to satisfy the demands of justice ***." (Lipton v. Donnenfeld, 5 AD3d 356, supra; Sanxhaku v. Margetis, 151 AD3d 778, supra.)
But, as noted, constructive trust is a flexible remedy and would probably be applied in the context of someone gambling with stolen funds as well.
The victim of the theft would have a cause of action in unjust enrichment, but they would have to, among other things, have “clean hands”. So, for example, if the victim and the thief were co-conspirators in stealing the money in the first place, the victim does not have “clean hands” and their case will fail.
The gambling winnings are clearly proceeds of crime and could be seized under that type of legislation. This would be true even if the extra was obtained in other, more legitimate ways like investing.
In the Netherlands it would fall under the equivalent of criminal asset forfeiture. Both the initially stolen money and the earnings from it (and anything purchased with those earnings) would be seized by the government. The initial victim would receive their lost property (10k) back, the government gets to keep the rest.
It's over the years become a rather lucrative cash grab, and is now used to seize all belongings of criminals that can't be positively identified by the accused of having been acquired before the crimes used to warrant the seizure.
I remember something similar happened in Austria, as reported in the news. I think they changed the law afterwards to prevent something like that from happening again.
In 1993, money and precious metals (bars and coins) worth 167,000 Euro in todays money were stolen. Years later, the robbers were caught, they went to jail and the state got its hands on the loot. The bank was compensated by the insurance company and the insurance company was compensated in turn by the state after the stolen goods were recovered. To everyone's surprise, in 2012 the main perpetrator received 63,000 Euro from the profit made from the sale of the precious metals due to the rising prices. They figured nobody else involved (the bank, the insurance company and the Austrian state) had any claim to this sum.
