OPINION AND ORDER

JOHN KOELTL, District Judge

Defendant Melissa King was indicted on February 17, 2010, on one count of theft and embezzlement from an employee welfare benefit plan and employee pension benefit plan, in violation of 18 U.S.C. § 664, and eleven counts of money laundering, in violation of 18 U.S.C. § 1957. On June 30, 2010, a superseding indictment (the "Indictment") was filed, adding one count of mail fraud, in violation of 18 U.S.C. § 1341, and four counts of tax evasion, in violation of 26 U.S.C. § 7201. The Indictment alleges that the defendant embezzled approximately $40 million from a union's employee benefit plans and laundered the embezzled funds through a series of bank accounts. (Indictment at 17.) It seeks the forfeiture of various property, including nine horses named All Sport, Bellingham Bay, Nelson, Fortune Hunter, Galliard, Heartfelt, North Country, Starlight, and Tiger Lilly, pursuant to 18 U.S.C. §§ 981(a)(1)(C) and 982, and 28 U.S.C. § 2461. (Indictment at 21-22.)

On March 2, 2010, the Court issued a post-Indictment restraining order preventing, among other things, the transfer or disposition of certain assets identified in the Indictment's forfeiture allegations, including the horses. The Government has now moved for the entry of an order authorizing the interlocutory sale of the horses pursuant to 21 U.S.C. § 853(e) ("section 853(e)"), Federal Rule of Criminal Procedure 32.2(b)(7), and Rule G(7)(b)(i) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. The Government alleges that the defendant is over $450,000 in arrears to Old Salem Farm in North Salem, New York ("Old Salem"), the farm that is caring for the horses, and that the substantial expense of caring for the horses is materially diminishing their value. The Government argues that an interlocutory sale is thus justified to preserve the value of the horses, and seeks permission to sell the horses and hold the proceeds pending the outcome of the case.

I.

Section 853(e) permits a district court to "enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability" of property subject to forfeiture. Under section 853(e)(1)(A), such an order may be obtained upon the filing of an indictment charging a violation for which criminal forfeiture may be ordered and alleging that the property with respect to which the order is sought would, in the event of the defendant's conviction, be subject to forfeiture. In addition, Federal Rule of Criminal Procedure 32.2(b)(7) provides that "at any time before entry of a final forfeiture order, the court, in accordance with Supplemental Rule G(7) of the Federal Rules of Civil Procedure, may order the interlocutory sale of property alleged to be forfeitable." Pursuant to Rule G(7)(b)(i) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, a court may order an interlocutory sale if, among other things, "the expense of keeping the property is excessive or is disproportionate to its fair market value," or for "other good cause."

II.

The nine horses were properly subject to the March 2, 2010, restraining order, pursuant to 18 U.S.C. § 982(b)(1) and 21 U.S.C. § 853(e)(1)(A), because an indictment has been filed charging a violation for which criminal forfeiture may be ordered and alleging that the horses would be subject to forfeiture in the event of the defendant's conviction. An interlocutory sale of the horses can be ordered pursuant to Federal Rule of Criminal Procedure 32.2(b)(7) and Rule G(7)(b)(i) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions if the expense of keeping them is "excessive" or "disproportionate" to their fair market value. The Government submitted evidence that the cost of maintaining the horses was indeed excessive and disproportionate to their fair market value. The defendant objected to the Government's evidence and asserted other objections. The court therefore held an evidentiary hearing on September 21-23 and October 7, 2010. The Court now makes the following findings of fact and reaches the following conclusions of law.

A.

The Government has submitted persuasive evidence, in the form of an appraisal by a certified equine appraiser, that the total value of the nine horses is $670,000. (Gov't's Reply Mem. Ex. D, at 9, 12.) Alan Bietsch, the general manager of Old Salem, swears that, as of September 3, 2010, $455,522 was owed to Old Salem on account of the services, goods, and supplies provided by the farm for their care. (Gov't's Reply Mem. Ex. A, at ¶ 5.) At the hearing, Mr. Bietsch testified that each horse currently being boarded at Old Salem was accruing additional charges of $3,000 per month, plus tax. (Hr'g Tr. 215: 4-18, Sept. 22, 2010.) Finally, Mr. Bietsch swore that there was no possibility that non-sale revenues from the horses could offset these costs; according to Mr. Bietsch, "even if all horses were prepared and trained to compete at a horse show and assuming several horses won top prizes, the winnings would never be enough to cover the costs involved." (Bietsch Aff. ¶ 12; Gov't's Reply Mem. Ex. A, at ¶ 12.)

At the hearing, the defendant disputed the appraised value of the horses and contested Mr. Bietsch's conclusion that the horses could not generate sufficient revenue to offset the costs of caring for them. The defendant's evidence on each point, however, is unpersuasive.

As to valuation, the defendant adduced testimony from Brian Walker, the horses' trainer, as to a maximum possible sale price for each horse under a set of hypothetical, "best-case" conditions. (Hr'g Tr. 132:5, Sept. 22, 2010.) This evidence is not persuasive for several reasons. First, Mr. Walker never completed an actual appraisal of the horses, nor is he trained to do so, in contrast to the Government's certified appraiser. (Hr'g Tr. 176:3-25.) Additionally, Mr. Walker's "best-case" valuation of the horses did not even purport to be a present market valuation; rather, Mr. Walker was asked to speculate as to the maximum possible price each horse could command at a sale under idealized, hypothetical conditions bearing little relation to present reality. For example, Mr. Walker was asked to assume that Starlight, one of the two most valuable horses, would recover from injuries that had left him unable to compete, from which he might never recover, and as a result of which he might never be sold. (Hr'g Tr. 138:1-3.) Finally, Mr. Walker's valuations were contingent upon the most valuable horses being able to show. Mr. Walker testified that there were substantial fees associated with showing a horse, including training fees, transportation fees, and fees levied by the horse show itself. (Hr'g Tr. 186:5-187:5.) Even assuming that the horses are or become fit to show, there is no one to pay these fees. Additionally, Mr. Walker testified that Old Salem has a policy against showing horses for which money is owed. (Hr'g Tr. 187:16-18.)

Moreover, notwithstanding the defendant's attempts to refute Mr. Bietsch's statement that "the winnings [from showing the horses] would never be enough to cover the costs involved" (Bietsch Aff. ¶ 12, attached as Ex. A to Gov't's Reply Mem.), the evidence on this point was uncontroverted. In fact, Mr. Walker, the defendant's witness, testified that the horses would not be able to generate sufficient revenue from competing to offset the marginal costs of competing, to say nothing of the total costs of their care. (Hr'g Tr. 174:9-10, 187:6-8.)

Accordingly, in light of all the evidence, the Court finds that the horses are declining assets, and that the "expense of keeping [them] is excessive" and is "disproportionate to [their] fair market value." Fed.R.Civ.P. Supp. R. G(7)(b)(i). Accordingly, the horses are a proper subject for interlocutory sale under Federal Rule of Criminal Procedure 32.2(b)(7).

B.

The defendant contends that horses are unique assets and therefore should not be sold, because they could not be returned to the defendant if it is determined that no forfeiture is warranted. However, other courts have found horses to be subject to forfeiture, notwithstanding their unique nature. See, e.g.,United States v. Rivera, 884 F.2d 544, 546 (11th Cir. 1989);Emmens v. United States, 44 Fed. Cl. 524, 525 (Fed. Cl. 1999). Moreover, real property has been the subject of interlocutory sale orders, even though that property also might not be able to be restored if it is ultimately determined that forfeiture was not warranted. See, e.g., United States v. Gianelli, 594 F. Supp. 148, 150 (D. Mass. 2009); U.S. v. McDonough, 05 Cr. 891, 2007 WL 2317103, *1 (N.D. Ill. Aug. 1, 2007).

The defendant is protected because the proceeds of any sale become a substitute res that is held pending the disposition of the criminal case. Rule G(7)(b)(iv) provides: "Sale proceeds are a substitute res subject to forfeiture in place of the property that was sold. The proceeds must be held in an interest-bearing account maintained by the United States pending the conclusion of the forfeiture action."

The defendant is thus protected because the sale of the horses would prevent further deterioration in the value of the assets and the proceeds would be preserved. Moreover, the procedures for the sale will be strictly controlled such that the sales price for each horse cannot be less than two-thirds of the current appraised value, unless the Court orders otherwise. See 28 U.S.C. §§ 2001, 2004. Further, the Court would allow the defendant to submit any competing firm offer for the sale of the horses and any final sale would be subject to approval by the Court. The defendant's interest in the horses will thus be amply protected.

III.

The statute and the Federal Rules of Criminal Procedure do not explicitly set out a procedure pursuant to which third party claims can be heard in connection with the interlocutory sale of property. As explained above, Rule G provides that sale proceeds are a substitute res subject to forfeiture in place of the property that was sold, and are to be held "pending the conclusion of the forfeiture action." Third parties are thus protected against the disposition of the proceeds until an ancillary proceeding is held following sentencing. See Fed.R.Crim.P. 32.2(c). However, there is no provision in the statute or the Rules that allows a third party to object to the interlocutory sale of potentially forfeitable property in which it has an interest.

Permitting the interlocutory sale of unique property without providing a party asserting an interest therein with notice and an opportunity to be heard would raise serious due process concerns. See De Almeida v. United States, 459 F.3d 377, 381 (2d Cir. 2006). In the context of a post-conviction order of forfeiture, such concerns are addressed by the provision of an ancillary proceeding at which third parties can object to a proposed sale of forfeitable property. See Fed.R.Crim.P. 32.2(c). While the statute and Rules do not similarly provide for a procedure prior to the interlocutory sale of property, they do not preclude a third party from being heard before entry of an order that would arguably result in the sale and transformation of the third party's property into a new res. Accordingly, in light of these due process concerns, the Court held a hearing on October 7, 2010, on the subject of Blantyre's asserted interest in the horses.

As it would have been required to do in the context of a petition for relief from a preliminary order of forfeiture, Blantyre was required to come forward with evidence of "the nature and extent of [its] right, title, or interest in the property, the time and circumstances of [its] acquisition of the right, title, or interest in the property, [and] any additional facts supporting [its] claim." See 21 U.S.C. § 853(n)(3). Ultimately, Blantyre would have been required to demonstrate, by a preponderance of the evidence, that it held an interest in the property superior to that of the defendant at the time of the defendant's criminal conduct. See 21 U.S.C. § 853(n)(6)(A).

Blantyre wholly failed to meet its burden of coming forward with evidence that it owned the horses. At the hearing, counsel for Blantyre was not able to point to any evidence that Blantyre held legal title to any of the horses. (Hr'g Tr. 55:19-56:10, Oct. 7, 2010.) He acknowledged that the only evidence of any third party's interest was (1) veterinary bills charged to J M King Trust, a third party that has not asserted an interest in the horses, (2) a certificate issued by the National Equestrian Federation of the United States, giving J M King Trust the right to exhibit the horses at competition, and (3) bills from Equine Brokerage to Blantyre, care of Melissa King. (Hr'g Tr. 55:10-18, 56:1-10.) This evidence is insufficient to establish a protectable ownership interest in the horses, much less that Blantyre holds such an interest.

CONCLUSION

SO ORDERED.