United States of America v. John E. Henricks , Iii

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐2383
U NITED STATES OF A MERICA ,
Plaintiff‐Appellee,
v.
J OHN E. HENRICKS , III,
Defendant,
A PPEAL OF : C ATHERINE HENRICKS .
____________________
Appeal from the United States District Court for the
Western District of Wisconsin.
No. 13‐cr‐00083 — Barbara B. Crabb, Judge.
____________________
A RGUED FEBRUARY 8, 2018 — D ECIDED MARCH 27, 2018
____________________
Before FLAUM, EASTERBROOK , and MANION, Circuit Judges.
MANION, Circuit Judge. John Henricks (Henricks) pleaded
guilty to mail fraud and was sentenced to imprisonment and
ordered to pay restitution. Henricks’s wife, Catherine,
(Ms. Henricks) entered an appearance as an interested person
in Henricks’s criminal case. The district court determined the
parties’ interests in various property so that Henricks’s prop‐
erty could be directed toward restitution to his victims.

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2 No. 17‐2383
Ms. Henricks appeals, arguing that the district court did not
have jurisdiction to decide the parties’ property interests in
Henricks’s criminal case, violated her due process rights by
not allowing her an opportunity to present her case, and im‐
properly determined the parties’ interests in particular prop‐
erty. In so far as the district court had jurisdiction to determine
the parties’ property interests in the criminal case and did not
violate Ms. Henricks’s due process rights, we affirm. How‐
ever, because the district court relied upon post‐judgment
conduct instead of determining the parties’ property interests
as of the date of the judgment lien, we vacate the district
court’s property‐interest determination and remand for fur‐
ther proceedings.
I. Background
John Henricks owned a towing business, an auto body
shop (Custom Collision), and a recreational vehicle dealer‐
ship. He used those businesses to defraud insurance compa‐
nies by filing fraudulent claims. Henricks’s wife, Catherine,
worked at some of these companies sporadically and was an
officer of two of them and a member of the other. Ms. Hen‐
ricks also opened bank accounts, applied for credit cards, and
signed loan documents on behalf of the companies.
On August 14, 2013, Henricks pleaded guilty to one count
of mail fraud. Instead of immediately beginning to make res‐
titution as required by his plea agreement, Henricks began to
hide assets. Because of these activities, the district court de‐
nied Henricks a sentencing reduction for acceptance of re‐
sponsibility. On January 9, 2014, he was sentenced to 121
months’ imprisonment and ordered to pay $1,306,608.72 in

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No. 17‐2383 3
restitution. The judgment was entered the next day. 1 Less than
two weeks later, Ms. Henricks filed for divorce.
On May 2, 2014, a writ of execution was issued directing
the U.S. Marshals Service to take possession of personal prop‐
erty at the couple’s home and at AJ’s Auto Body, a business
that the couple set up in Ms. Henricks’s name after Henricks
was indicted. Four days later, Ms. Henricks filed a voluntary
Chapter 7 bankruptcy petition. On May 7, the Marshals se‐
cured property associated with the Henrickses’ businesses in
accordance with the writ of execution.
On May 20, Ms. Henricks filed an appearance as an inter‐
ested person in her husband’s criminal case because she
claimed an interest in various property that was potentially
subject to Henricks’s restitution order. Ms. Henricks also filed
a notice of the bankruptcy automatic stay, a response to the
clerk’s notice of execution, and a motion for a stay of execu‐
tion. A little over two weeks later, the district court ordered
the parties to brief whether the bankruptcy stay halted the
government’s restitution collection efforts, whether the mari‐
tal estate had been unjustly enriched by Henricks’s criminal
activities, and, if so, whether Ms. Henricks was entitled to a
full half of the marital assets.
On November 20, 2014, the government filed a motion for
a default finding for relief pursuant to 18 U.S.C. § 3613A and
resentencing pursuant to 18 U.S.C. § 3614 on the grounds that
Henricks willfully defaulted on his restitution payments. In
its motion, the government requested that the district court
1 The government perfected its lien against Henricks’s property and
rights to property by filing lien notices in Portage and Oneida counties in
Wisconsin on February 7, 2014, and February 10, 2014, respectively.

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4 No. 17‐2383
order Henricks to pay restitution using various property, in‐
cluding the assets of AJ’s Auto Body, Ms. Henricks’s retire‐
ment account, and the Henrickses’ 2013 federal income tax re‐
fund.
Ms. Henricks filed an objection to the government’s mo‐
tion for restitution default and resentencing, specifically ob‐
jecting to the property the government sought to apply to
Henricks’s restitution, and requested a hearing on the motion.
On January 7, 2015, the district court granted Ms. Henricks’s
motion for a stay of the writ of execution stating that “it would
be premature to decide the extent to which the government is
entitled to seize Ms. Henricks’s property” until the bank‐
ruptcy court lifted the automatic stay. United States v. Henricks,
2015 WL 106160, at *1 (W.D. Wis. Jan. 7, 2015). In that same
order, the district court scheduled an evidentiary hearing on
the government’s restitution default and resentencing motion
for April 16, 2015.
Also on January 7, Ms. Henricks received her discharge
from the bankruptcy court. She then filed a complaint for an
adversary proceeding in the bankruptcy court, alleging that
the government violated the automatic stay by continuing to
keep property it locked in buildings on AJ’s Auto Body prop‐
erty on May 7, 2014.
On April 16, 2015, the district court held a hearing on the
government’s motion for default and resentencing. Because
neither Ms. Henricks nor her attorney was present, the district
court deferred resolving the government’s property claims for
restitution. The district court found Henricks defaulted on his
restitution payments. It found that Henricks and Ms. Hen‐
ricks worked together before and after Henricks’s January 9,
2014 sentencing to hide or shelter assets from restitution. The

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No. 17‐2383 5
court also found that the couple’s divorce, the property settle‐
ment of which was entered on February 10, 2015, was a sham
to divert assets from restitution. In making this finding, in ad‐
dition to the divorce property settlement, the district court
cited recorded prison phone calls and e‐mails between the
couple. To call the divorce property settlement lopsided
would be an understatement:
Combined, the assets allocated to Henricks
were worth minus $93,000. Add to that the more
than $1.6 million in marital debt allocated to
Henricks, and he was left with a debt of more
than $1.76 million, not counting the $1.3 million
he owes in restitution. Henricks’s wife, on the
other hand, was allocated $167,000 in marital as‐
sets, including a $18,537 federal tax refund. (She
had previously spent the couple’s $8,000 state
tax refund.) In addition, she was allocated a new
home in Amherst Junction, Wisconsin and the
new auto body business[, AJ’s Auto Body]. The
only debt she was allocated was that pertaining
to the new auto body business, roughly
$220,000.
United States v. Henricks, 658 F. App’x 813, 815 (7th Cir. 2016).
In concluding that Henricks willfully failed to pay restitution,
the district court also cited Henricks’s failing to turn over to
the government for restitution the income tax refunds and
laundering of auto body shop tools through A.J.’s Auto Body. 2
2 In a previous appeal, we affirmed Henricks’s judgment and convic‐
tion, holding that the “district court did not clearly err either in finding

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6 No. 17‐2383
The district court resentenced him to an additional thirty
months’ imprisonment resulting in a sentence of 151 months’
imprisonment and $1,306,608.72 in restitution, which was un‐
changed from his initial sentencing.
Ten months later, on February 11, 2016, the bankruptcy
court entered an order modifying the automatic stay so that
the district court or a court of competent jurisdiction might
make a determination about Ms. Henricks’s property interest
in the sequestered property. 3 Accordingly, on March 30, 2016,
the government filed a motion in Henricks’s criminal case to
determine Ms. Henricks’s property interests and the amount
of restitution that the government could recover from the as‐
sets at issue. Afterwards, Ms. Henricks filed a timely opposi‐
tion brief and a motion for abatement, but never requested a
hearing on either motion.
While the government’s motion for property determina‐
tion and Ms. Henricks’s motion for abatement were still pend‐
ing, the district court issued what is docketed as a “memoran‐
dum” on October 12, 2016, noting that it would assume that
these motions were ready for decision unless it heard from
that Henricks’s failure to pay restitution was willful or in resentencing
Henricks while he was in custody.” Henricks, 658 F. App’x at 814.
3 Following the bankruptcy’s court’s order, Ms. Henricks filed a de‐
claratory judgment action in Wisconsin state court seeking a determina‐
tion of her property interests. The government removed the case to fed‐
eral court and filed a motion to dismiss for lack of jurisdiction. Henricks v.
United States, 16‐cv‐101‐bbc (W.D. Wis. Feb. 23, 2016). The district court
granted the government’s motion on August 31, 2016. Ms. Henricks did
not appeal the dismissal of that case, and, thus, we do not have jurisdiction
over her argument that the district court erred in dismissing it.

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No. 17‐2383 7
either party before October 19, 2016. The government re‐
sponded that the issues were fully briefed; Ms. Henricks did
not file any response.
On January 9, 2017, three years to the day after Henricks
was first sentenced, the district court ruled on Ms. Henricks’s
property rights. The district court concluded that it had juris‐
diction to make its determination under the Mandatory Vic‐
tim Restitution Act (MVRA) and the Fair Debt Collection Pro‐
cedures Act (FDCPA), and applied Wisconsin law to deter‐
mine the parties’ interests. Ms. Henricks argued that the as‐
sets assigned to her as part of the divorce settlement were her
property and not subject to Henricks’s restitution order, and
that her discharge in bankruptcy protected her property
rights. In response, the district court found that the divorce
was a sham and held that Ms. Henricks was not entitled to
retain most of the disputed assets because she was not an “in‐
nocent spouse” under Wisconsin law. In so concluding, the
district court cited Ms. Henricks’s involvement with Hen‐
ricks’s various companies that served as the vehicles for his
fraud as well as her degrees in accounting and management
and her work in those fields. The district court also relied
upon factual findings it made at the April 2015 resentencing
hearing and discussed extensively the parties’ conduct after
Henricks’s judgment was entered on January 10, 2014, partic‐
ularly the parties’ sham divorce. These factual findings served
as the basis for the district court’s determinations about the
parties’ ownership interests in Ms. Henricks’s retirement ac‐
count, AJ’s Auto Body, and the couple’s 2013 federal income
tax refund.
Ms. Henricks established her retirement account through
her employment with a pet care company, Foster & Smith,

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8 No. 17‐2383
where she worked from 2001–2013. This account had over
$100,000 in it, all of which came from Ms. Henricks’s wages.
The government argued that Ms. Henricks would not have
been able to contribute as much as she did to her retirement
account had it not been for her husband’s fraud. The district
court rejected this argument, noting that the government had
not stated what the amount would be absent Henricks’s fraud
and concluded that the government was not entitled to any
part of Ms. Henricks’s retirement account. Regarding the cou‐
ple’s 2013 income tax refund, the district court held that the
government was entitled to the part of the refund that ex‐
ceeded the amount of wages attributable to Ms. Henricks’s
Foster & Smith earnings and ordered the parties to provide
additional briefing on what those amounts were. Finally, the
district court held that the government was entitled to the
funds from AJ’s Auto Body because the couple used the di‐
vorce as a means to protect ill‐gotten gains and the govern‐
ment showed that AJ’s only existed because, as the district
court found at Henricks’s resentencing, Ms. Henricks allowed
a shady tool dealer to take assets belonging to Custom Colli‐
sion, in return for cash and new tools.
Both the government and Ms. Henricks filed motions for
reconsideration. The government argued that because the di‐
vorce was a sham, the retirement account was a marital asset.
As a result, Henricks had a half‐interest in the account,
thereby making it subject to his restitution order. The district
court agreed and reversed its prior ruling about Ms. Hen‐
ricks’s retirement account. Specifically, the district court held
that because the Henrickses’ divorce was a sham, Wisconsin
marital property law should be applied as if there was no di‐
vorce, thereby entitling the government to one‐half interest in

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No. 17‐2383 9
Ms. Henricks’s retirement account because it is marital prop‐
erty.
In her motion for reconsideration, Ms. Henricks asserted
that the district court lacked jurisdiction and had no authority
to determine her property rights and that she had no oppor‐
tunity to be heard regarding the legitimacy of the divorce. She
also argued that the district court erred in holding that she
had no property interest in AJ’s Auto Body. In support of her
motion, Ms. Henricks submitted for the first time various ex‐
hibits, including her own affidavit detailing her position on
the events of the case and the property at issue, receipts, and
loan and other documents. The district court denied Ms. Hen‐
ricks’s motion holding that it had jurisdiction to determine her
property claims, that she failed to rebut extensive evidence
that the divorce was a sham, and that she had no interest in
A.J.’s Auto Body because it was created from Henricks’s
fraudulent conduct and funds.
Finally, regarding the 2013 federal tax refund, the parties
submitted supplemental briefing on the refund amount and
sources. The total refund was $18,537; $5,416.93 of the refund
was withheld from Ms. Henricks’s wages from Foster & Smith
and Communication Logistics, Inc., and $12,120 was withheld
from Henricks’s wages from Custom Collision and AJ’s Auto
Body. The parties also claimed a $1,000 child tax credit. The
district court held that Ms. Henricks was entitled to $5,917 as
her portion of the 2013 federal tax refund and child tax credit,
with the remainder to be applied to restitution. The district
court also corrected the clerical error in its January 9, 2017 or‐
der that the refund was from the couple’s federal and not state
income tax refund.

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10 No. 17‐2383
Ms. Henricks now appeals. On appeal, Ms. Henricks con‐
tends that the district court did not have jurisdiction to deter‐
mine her property rights in Henricks’s criminal case, and
those determinations should have been made in a separate
civil case. Ms. Henricks also asserts that the district court vio‐
lated her due process rights by not allowing her the oppor‐
tunity to present her case in the criminal proceedings. Finally,
Ms. Henricks argues that the district court erred in its appli‐
cation of Wisconsin law in determining the parties’ property
interests. We address each argument in turn.
II. Discussion
On appeal, we review a district court’s factual determina‐
tions for clear error and questions of law de novo. See generally
United States v. Stadfeld, 689 F.3d 705, 709 (7th Cir. 2012).
Ms. Henricks argues that her property rights should not
have been determined in Henricks’s criminal case, but instead
should have been decided in a separate civil action. We disa‐
gree. As we have previously held, “the government’s initia‐
tion of civil garnishment proceedings within the criminal case
was procedurally appropriate under the MVRA and the
FDCPA, and there is no concern about the district court’s ju‐
risdiction.” United States v. Kollintzas, 501 F.3d 796, 801 (7th
Cir. 2007). Such proceedings are appropriate in the criminal
case even in cases in which a spouse asserts a property inter‐
est. See id. at 800–01.
The district court determined Henricks’s property rights
so the government could collect on his restitution obligation
to his fraud victims. Because the property was marital prop‐
erty, it necessarily implicated Ms. Henricks’s property rights,

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No. 17‐2383 11
and the district court was within its statutory authority to de‐
termine Henricks’s ownership interests in the property so that
it could be applied to his restitution. Moreover, Ms. Henricks
submitted to the district court’s jurisdiction by entering an ap‐
pearance as an interested party, filing motions of her own and
responding to the government’s motions. See id. at 801–02
(holding that the court had jurisdiction to decide the wife’s
appeal of a criminal garnishment proceeding when the wife
participated in the criminal proceeding as an interested per‐
son). While Ms. Henricks tries to make much of the fact that
the FDCPA sets forth civil procedures, this argument ignores
the fact that “[t]he FDCPA is a procedural vehicle … for the
enforcement” of a restitution order in a criminal case. Id. at
801. Therefore, the district court properly employed the
FDCPA in Henricks’s criminal case.
In addition to her jurisdictional challenge, Ms. Henricks
asserts that the district court violated her due process rights
because she never had an opportunity to present her position
about her divorce or “to provide testimony about the genesis
of A.J.’s [Auto Body]” in the criminal proceedings. (Appel‐
lant’s Brief at 24.) The record belies Ms. Henricks’s claim.
Ms. Henricks actively participated in the case, filing motions,
briefs, and responses to the government’s motions after she
entered an appearance in May 2014. And Ms. Henricks squan‐
dered her other opportunities to present her case. Despite re‐
questing a hearing on the government’s motion for default
and resentencing, neither Ms. Henricks nor her attorney at‐
tended that hearing. Also, Ms. Henricks provided no re‐
sponse to the district court’s October 12, 2016 memorandum,
which essentially invited the parties to alert it to additional
evidence or briefing on the government’s motion to determine
her property rights and on her motion for abatement. Further,

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12 No. 17‐2383
Ms. Henricks only presented rebuttal evidence about AJ’s
Auto Body in her motion for reconsideration, rather than in
her original brief, when that evidence was available before the
district court issued its January 9, 2017 order. See generally Fed.
R. Civ. P. 60(b) (requiring that evidence must be newly discov‐
ered to serve as a basis for relief from a judgment or an order).
Ms. Henricks cannot cry foul when she failed to take ad‐
vantage of ample opportunities to present her case. Finally,
the record shows that not only did Ms. Henricks have an op‐
portunity to participate in the criminal case, but the district
court considered Ms. Henricks’s arguments when ruling.
Therefore, Ms. Henricks’s contention that she never had an
opportunity to participate in the criminal proceedings is with‐
out merit, and her due process rights were not violated.
Turning now to the district court’s determination of the
couple’s ownership interests, “[a]n order for payment of res‐
titution becomes a lien on all property and rights to property
of the defendant upon entry of judgment[.]” Kollintzas, 501
F.3d at 802 (citing 18 U.S.C. § 3613(c)). In this case, the govern‐
ment’s lien attached to Henricks’s property and rights to prop‐
erty on January 10, 2014, the date of his criminal judgment.
Liens resulting from restitution judgments are treated like
federal tax liens. Id. (citing 18 U.S.C. § 3613, 26 U.S.C. § 6321).
To determine the property to which the lien will attach, ‘‘[w]e
look initially to state law to determine what rights the tax‐
payer [or in this case, the criminal defendant] has in the prop‐
erty the Government seeks to reach, then to federal law to de‐
termine whether the taxpayer’s [or defendant’s] state‐deline‐
ated rights qualify as ‘property’ or ‘rights to property’ within
the compass of the federal tax lien legislation.’’ Id. (first alter‐
ation in original) (quoting Drye v. United States, 528 U.S. 49, 58

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No. 17‐2383 13
(1999)). The FDCPA also allows the government to take action
against property as allowed under the law of the state where
the property is located. 28 U.S.C. § 3010(a). State law is used
only to determine the parties’ property rights, and federal law
is applied to determine whether the property could be liqui‐
dated for restitution payments. See Kollintzas, 501 F.3d at 802.
Under Wisconsin marital property law, a spouse’s interest
in property is, in relevant part, a “present undivided one‐half
interest in each item of marital property.” Wis. Stat.
§ 766.31(3). Any obligations incurred during the marriage are
presumed to be incurred for the benefit of the family, and
therefore can be satisfied by all of the marital property as well
as property held by the obligated spouse. Wis. Stat.
§§ 766.55(1), (2)(a)–(b). There is an exception to this general
rule for “an obligation incurred by a spouse during marriage,
resulting from a tort committed by that spouse during mar‐
riage.” Wis. Stat. § 766.55(2)(cm). Such an obligation “may be
satisfied from the property of that spouse that is not marital
property and from that spouse’s interest in marital property.”
Id. A “tort,” as the word is used in the statute, may include a
criminal act if the conduct constituting the criminal act would
also constitute a tort. Curda‐Derickson v. Derickson, 668 N.W.2d
736, 742 (Wis. Ct. App. 2003). Wisconsin courts have con‐
cluded that § 766.55(2)(cm) protects an “innocent spouse,”
i.e., one who did not take part in the tort, from personal liabil‐
ity for torts committed by the other spouse. Curda‐Derickson,
668 N.W.2d at 742–43 (holding that a restitution order was not
a marital debt where a spouse was an “innocent spouse” be‐
cause she “had no active part” in taking money for which her
husband was found guilty of conspiracy to defraud an Indian
gaming establishment and money laundering); Bothe by Gross

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14 No. 17‐2383
v. Am. Family Ins. Co., 464 N.W.2d 109, 110 (Wis. Ct. App.
1990).
Ms. Henricks insists that the couple’s divorce property set‐
tlement changed the couple’s ownership interests and, thus,
should have been considered by the district court when mak‐
ing its property rights determinations. This argument ignores
the timeline of events in this case and the basic legal principles
regarding the priority of judgments. The government’s lien
against Henricks’s property and interests in property attached
on January 10, 2014, the date of the judgment. See Kollintzas,
501 F.3d at 802 (”An order for payment of restitution becomes
a lien on all property and rights to property of the defendant
upon entry of judgment[.]” (emphasis added)). Ms. Henricks
did not file for divorce until after Henricks was sentenced,
and the couple’s marital property agreement was not entered
until February 10, 2015, thereby making it secondary to the
government’s lien. See United States v. McDermott, 507 U.S. 447,
449 (1993) (noting in a dispute about the priority of a federal
tax lien that “[a]bsent provision to the contrary, priority for
purposes of federal law is governed by the common‐law prin‐
ciple that ‘“the first in time is the first in right.’” ” (quoting
United States v. City of New Britain, 347 U.S. 81, 85 (1954))).
Therefore, the proper inquiry regarding the parties’ property
rights in cases such as these is, “What were the parties’ own‐
ership interests on the date of the judgment?” State law is em‐
ployed to ascertain who owned what property, and then fed‐
eral law is employed to determine whether the lien, as of the
date of the judgment, attaches to the relevant property and
rights in property.
Unfortunately, in this case, no one, not the government,
not Ms. Henricks, nor even the district court, stated what the

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No. 17‐2383 15
temporal point was for determining the parties’ ownership in‐
terests, much less that it was the date of the judgement. Per‐
haps the district court was responding to the parties’ argu‐
ments that the couple’s divorce impacted the property deter‐
mination, but the district court erred by basing its decision on
the divorce and other events that occurred after January 10,
2014. Whether the divorce was a sham was relevant to
whether Henricks’s defaulted on his restitution payments, but
it is irrelevant to what the parties’ ownership interests were
on the date of the judgment. 4 Assuming they are supported
by the record, we find no fault in the district court’s reliance
on factual findings it made at Henricks’s April 2015 re‐sen‐
tencing hearing in so far as those facts took place on or before
January 10, 2014. But we cannot review the district court’s le‐
gal conclusions because they are based on factual findings
that include events that occurred after the restitution judg‐
ment was entered and the government’s lien attached. There‐
fore, we vacate the district court’s property determinations
and remand for the district court to determine the parties’
property interests as of January 10, 2014, and then determine
what property is subject to the government’s restitution order.
4 Citing the Rooker‐Feldman doctrine, Ms. Henricks also argues that the
district court erred by ruling that her divorce was a ruse and improperly
undermined her divorce by making determinations about property settled
in the divorce. Because the district court improperly considered the di‐
vorce in making the property determination, we need not address this ar‐
gument.

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16 No. 17‐2383
III. Conclusion
For the foregoing reasons, the judgment of the district
court is AFFIRMED in part and VACATED in part, and the
case is REMANDED for further proceedings.

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