maryland forfeiture digest: a compilation of recent...
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Maryland Forfeiture Digest: A Compilation of Recent Money Laundering and Asset Forfeiture Cases
July 2015
Prepared by Stefan D. Cassella, Contractor/Consultant Asset Forfeiture Law, LLC
Pre-Trial Restraining Order / Substitute Assets Supreme Court grants cert. to determine if the pre-trial restraint of substitute property violates due process and the right to counsel. Luis v. United States, ___ U.S. ___, 2015 WL 2473302 (June 8, 2015). Supreme Court * A grand jury returned an indictment charging Defendant with a federal health care offense in violation of 18 U.S.C. § 1349, and providing notice that the Government would be seeking the forfeiture of $45 million in proceeds. Defendant had dissipated most of the proceeds but he had other assets that could be forfeited as substitute assets in partial satisfaction of any forfeiture judgment if he were to be convicted.
Substitute assets are generally not subject to pre-trial restraint in a criminal case, but the Government had an alternative: it filed a separate civil action under 18 U.S.C. § 1345(a)(2), seeking the pre-trial restraint of Defendant’s untainted property up to the amount derived from the health care fraud offense. It could do so because Section 1345(a)(2), which applies in cases involving health care fraud, bank fraud and money laundering, specifically authorizes the pre-trial restraint of the proceeds of the offense or property of equivalent value.
The court found that the requirements of
Section 1345 were satisfied and issued the restraining order. It agreed with Defendant that he was entitled to a post-restraint hearing at which he could challenge the probable cause for
the restraint, but it rejected his argument that the pre-trial restraint of untainted substitute assets would violate his right to counsel under the Sixth Amendment even if the Government established probable cause.
If the actual fraud proceeds of a crime
may be restrained, the court said, there is no reason to reward a defendant who has spent those proceeds by refusing to restrain other property of equal value that he has in his possession. Accordingly it held that as long as a statute authorizes the pre-trial restraint of substitute assets --- which Section 1345(a)(2) does --- and the Government establishes probable cause – which it did, a court may order the restraint of those assets without violating the defendant’s right to counsel. United States v. Luis, 2013 WL 4757838 (S.D. Fla. June 21, 2013). Defendant appealed but the Eleventh Circuit affirmed. United States v. Luis, ___ Fed. Appx. ___, 2014 WL 1708888 (11th Cir. May 1, 2014).
Defendant’s Sixth Amendment
arguments, the panel said, were foreclosed by the Supreme Court’s decisions in Kaley, Caplin & Drysdale, and Monsanto. Accordingly, because the Government established probable cause to believe the property would be awarded to the Government in the civil case as property of equivalent value, the restraining order was properly entered under Section 1345.
Defendant filed a cert. petition which the
Supreme Court granted to resolve the constitutional issue. SDC Contact: AUSA Susan Torres (S.D. Fla.)
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Comment: Contrary to some press reports, this case does not involve the split in the circuits over the pre-trial restraint of substitute assets under 21 U.S.C. § 853(e). Those cases involve a question of statutory interpretation, with the majority of courts holding that the language of Section 853(e) does not encompass substitute assets and a small minority holding that it does. Rather, this case involves Section1345 which expressly authorizes the pre-trial restraint of the proceeds of the offense or property of equivalent value – i.e., substitute assets. The question before the court therefore is not whether the restraint of substitute assets is authorized by statute, but whether a statute that expressly authorizes such restraint violates due process and the right to counsel under the Fifth and Sixth Amendments. There is no circuit split on that issue: the Eleventh Circuit is the only appellate court to address the issue in connection with any statute that expressly authorizes the pre-trial restraint of substitute assets, and the Fourth Circuit, the only appellate court to interpret Section 853(e) to permit such restraint, has not found any constitutional bar to that interpretation. Although this case does not involve Section 853(e), an adverse decision would effectively end the pre-trial restraint of substitute assets under that statute in the Fourth Circuit on constitutional grounds, at least in cases where the defendant needed the restrained funds to retain counsel, and it would foreclose the option of using Section 1345 to restrain substitute assets pretrial in health care, bank fraud and money laundering cases in those circumstances. On the other hand, an affirmance would leave the status quo in place, and the split in the circuits with respect to Section 853(e) unchanged. SDC Pre-Trial Restraining Order / Substitute Assets / Jones-Farmer Rule / Tracing
Strict tracing is not required to establish probable cause to believe that property is traceable to fraud proceeds; that the property was purchased with funds from a commingled bank account is sufficient.
United States v. Toran, 2015 WL 1968698 (C.D. Ill. May 1, 2015). C.D. Ill. * An indictment charged Defendant with multiple counts of Medicaid fraud and sought the forfeiture of two parcels of real property allegedly purchased with fraud proceeds. Defendant was permitted to sell the two parcels and to place the proceeds of the sale in escrow pending the outcome of the criminal case. Defendant then moved for the release of the escrowed funds to pay his attorney’s fees. Finding that Defendant lacked other funds with which to retain counsel, the court held a probable cause hearing to determine if the funds were traceable to Defendant’s offense. In the hearing, the Government established that one of the parcels was traceable in its entirety to a bank account containing commingled funds, at least 50 percent of which were derived from the fraud scheme. Such evidence, the court held, is sufficient to establish probable cause to believe that the entire parcel was forfeitable; thus, none of the funds in the escrow account derived from the sale of the first parcel could be released to Defendant to pay his attorney’s fees. With respect to the second parcel, the court held that the $69,000 that Defendant used to pay off the mortgage on the parcel came from the same commingled account, and that therefore there was probable cause to believe that $69,000 of the proceeds of the sale of the second parcel were subject to forfeiture. The balance of the money from the sale of the second parcel, however, represented the equity Defendant had in the property before he used the
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fraud proceeds to pay off the mortgage. Accordingly, there was no probable cause to restrain the balance from the second parcel as directly forfeitable property. The Government argued that the balance should nevertheless be restrained for forfeiture as substitute assets, but the court followed the majority rule and held that pre-trial restraint of substitute assets is not authorized under 21 U.S.C. § 853(e). Accordingly, the court denied the motion to release any of the proceeds of the sale of the two parcels except for the portion that represented Defendant’s pre-existing equity in the second parcel. SDC Contact: AUSAs Greg Gilmore, Timothy Bass and Tom Henrikson Comment: There are several interesting nuggets in this opinion. First, although the Seventh Circuit has not expressly adopted the Jones-Farmer rule, the court interprets United States v. Moya-Gomez, 860 F.2d 706, 729 (7th Cir. 1988) – an early decision that pre-dates Jones-Farmer – as implicitly requiring a post-restraint probable cause hearing only if the defendant establishes that he lacks other funds with which to preserve his Sixth Amendment right to counsel. Second, although the Seventh Circuit also has not expressly ruled on the pre-trial restraint of substitute assets, the court assumes that it would follow the majority rule on that issue. Finally and most importantly, the court holds that the strict tracing of funds derived from a commingled bank account is not necessary to establish probable cause to believe that property is subject to forfeiture. Several other courts have reached a similar conclusion. See United States v. Melrose East Subdivision, 357 F.3d 493, 507 (5th Cir. 2004) (to establish probable cause for forfeiture in a fraud case, Government
not required to trace fraud proceeds to specific assets or discount possibility that defendant had some legitimate income). That good news, however, only applies to the probable cause requirement in the pre-trial stage. Courts remain reluctant to allow the Government to establish forfeitability by a preponderance of the evidence at trial when commingled funds are involved. Compare United States v. Smith, 749 F.3d 465, 488-89 (6th Cir. 2014) (if an asset is derived from a bank account into which criminal proceeds greatly exceeding the value of the asset were deposited, the district court may infer that the asset is traceable to the criminal offense) with United States v. Voigt, 89 F.3d 1050 (3d Cir. 1996) (Government cannot satisfy its tracing burden where criminal proceeds have been commingled with legitimate funds in a bank account; its remedy is to obtain a money judgment and forfeit substitute assets). The solution in this case as in many others like it may have been to allege that the paying off of the mortgage on the second parcel constituted a money laundering offense in violation of 18 U.S.C. § 1957, in which case the entire parcel, including the portion representing the defendant’s pre-existing equity, would have been subject to forfeiture as property involved in the money laundering offense. See United States v. Kivanc, 714 F.3d 782, 794-95 (4th Cir. 2013) (residence in which fraud proceeds were invested is subject to forfeiture in its entirety as property involved in a money laundering offense, even though legitimate funds were also invested in the property). There are other cases on this point in Section II.B.2 of my Money Laundering Forfeiture Case Outline. SDC Pre-Trial Restraining Order / Jones-Farmer
Rule / Right to Jury A defendant appearing pro se cannot satisfy the first prong of the Jones-Farmer Rule because he
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has no legal expenses; because his Sixth Amendment right to counsel is not implicated, he has no right to a post-restraint probable cause hearing.
There is no right to a jury under Rule 32.2(b)(5) if the Government is seeking only a money judgment and substitute assets.
United States v. Cohen, 2015 WL 2261661 (D. Md. May 7, 2015). D. Md. * Defendant was charged with money laundering, aggravated identity theft and wire fraud, all arising out of a scheme to defraud insurance regulators. The indictment contained a notice that the Government would be seeking a forfeiture money judgment of $100 million. Prior to trial, the Government seized or restrained numerous assets that were either traceable to the offense or (applying the Fourth Circuit rule) forfeitable as substitute assets. Defendant, who was appearing pro se, requested a probable cause hearing at which he could challenge the Government’s right to maintain custody of his property, but the magistrate judge denied the request on the ground that Defendant could not satisfy the second prong of Jones-Farmer Rule. So Defendant appealed to the district court. The court affirmed the magistrate judge and denied the request for the probable cause hearing on the ground that Defendant could not satisfy either prong of Jones-Farmer. Under the first Jones-Farmer prong, the defendant must show that the Government’s pre-trial seizure or restraint of his property is depriving him of funds that he needs to preserve his Sixth Amendment right to counsel. But the court held that because Defendant was appearing pro se, he did not need any funds to retain counsel. Defendant objected that he would use the funds to hire stand-by counsel, but
the court held that there is no Sixth Amendment right to have stand-by counsel. Thus, Defendant’s Sixth Amendment rights were not implicated. Second, the court held that Defendant also could not satisfy the second Jones-Farmer requirement, viz., that there was reason to believe the initial restraint or seizure was in error. Finally, Defendant asked that the forfeiture issue be submitted to the jury if he was found guilty, but the court held that because the Government was seeking only a money judgment and substitute assets, the statutory right to a jury in Rule 32.2(b)(5) did not apply. SDC Contact: AUSA Joyce McDonald Money Laundering / Structuring / Motion to Dismiss Complaint / Jurisdiction A civil forfeiture complaint may allege multiple, overlapping theories without having to spell out which facts and which assets relate to each theory.
A complaint need only allege sufficient facts to support a theory of forfeiture as to each asset; it need not allege facts sufficient to negate an innocent owner defense.
A complaint alleging the structured deposits of drug proceeds may be filed in the district where the drug offense occurred, even if the structuring itself occurred elsewhere.
United States v. JP Morgan Chase Bank, 2015 WL 1820042 (N.D.N.Y. Apr. 22, 2015). N.D.N.Y. * The Government filed a civil forfeiture action against various bank accounts into which third parties had allegedly made structured deposits of money derived from cocaine sales in the Northern District of New York. The
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complaint alleged that the money was forfeitable because it was involved in structuring and money laundering, 18 U.S.C. § 981(a)(1)(A) and 31 U.S.C. § 5317(c), respectively, and because it was traceable to drug proceeds, 21 U.S.C. § 881(a)(6). Claimants, who owned a video game wholesale business that conducted a large volume of business with a company in Peru, moved to dismiss the complaint on a number of grounds. First, they argued that the complaint failed to make clear which of the Government’s factual allegations applied to which of its theories, but the court held that the Government was not required to do so. Nothing in Rule G, the court said, prohibits the Government from pleading multiple theories, and nothing requires it to categorize its factual allegations in a way that assigns certain facts to certain theories. Where, as here, the theories overlap and a given fact may support multiple theories, it is only necessary to allege sufficient facts to support each theory. Next, Claimants argued that the court lacked jurisdiction over the structuring and money laundering theories because there was no allegation that either the structured deposits or the money laundering transactions occurred in the Northern District of New York. But the court held that it was sufficient that for the Government to allege that those transactions involved the proceeds of cocaine sales that did occur in the district in which the complaint was filed. Claimants also challenged the sufficiency of the complaint itself. With respect to the structuring theory, they argued, the complaint failed to allege who committed the structuring offense and thus did not allege facts sufficient to suggest that that person knew of the reporting offense and intended to evade it. If the perpetrator was unknown, they argued, then his
knowledge and intent were similarly unknown. But the court disagreed. In an in rem forfeiture action, the court said, it is only necessary for the Government to allege that the person who committed the structuring offense, whoever he was, possessed the necessary mens rea – a fact that may be gleaned from the pattern of structured deposits. As long as the person who made the deposits had the requisite knowledge and intent, the funds that were deposited would be subject to forfeiture as property involved in the structuring offense. A complaint that alleges sufficient facts to support that allegation is sufficient to survive a motion to dismiss. To be sure, the court added, the account holder may have been unaware of the structuring activity, and Claimants will have an opportunity to raise that defense at trial; but the Government does not have to allege facts negating the innocent owner defense in its complaint. Finally, Claimants argued that the complaint failed to allege sufficient facts to support the Government’s money laundering theory. But the court held that the allegations, including large transfers to the defendant bank accounts from accounts held by a Peruvian company into which drug proceeds and been deposited, and various indications that Claimants’ financial transactions were not always related to business purposes, were sufficient to support the money laundering and drug proceeds theories. So the motion to dismiss was denied. SDC Contact: AUSA Sean O’Dowd Comment: It’s not uncommon – particularly in a money laundering case – to allege overlapping theories of forfeiture. Some of the money may be traceable to drug proceeds, some may be
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structured funds, and some may have been commingled in the course of money laundering transactions. Typically, a given fact may support more than one of these theories, and a given dollar may fall into more than one category. What this court holds is that in that situation, it is not necessary, for purposes of the forfeiture complaint, for the Government to construct a three-dimensional diagram showing how each fact, asset and theory links to the other. Rather, all that is necessary is to show, for a given asset, there are sufficient facts to support a reasonable belief that that asset is subject to forfeiture under one of the theories. The jurisdictional issue is also interesting. 28 U.S.C. § 1355(b) provides that a civil forfeiture complaint may be filed in the district where the crime giving rise to the forfeiture action took place. What the claimants argued is that if the structuring and money laundering offenses occurred outside of the N.D.N.Y., there was no basis for filing a complaint based on those theories in that district. The court rejects that argument, but its reasoning is unclear. It notes that the complaint alleges that the money involved in those offenses was derived from drug offenses that occurred in the district; thus the holding seems to be that even though the source of the money is irrelevant for purposes of a structuring offense, the complaint may be filed in the district where the money originated. Or the court may simply be holding that as long as the complaint alleges at least one theory that arose in the district, it is permissible to include related theories in the same complaint. SDC Motion to Dismiss Complaint / Money Laundering Complaint alleging bank account was used to receive payments for stolen goods need not allege what fraction of the money in the account
is traceable to such payments.
If the offense underlying a civil forfeiture action requires proof of a mens rea element, such as the claimant’s knowledge that he was buying and selling stolen property, it is sufficient if the complaint alleges facts showing “a probability or a substantial chance” that the claimant had such knowledge.
When the claimant files a motion to dismiss, the focus is on the sufficiency of the complaint; that the claimant may have a viable defense is not relevant.
United States v. Funds in the Amount of $246,197.44, 2015 WL 1943346 (N.D. Ill. Apr. 29, 2015). N.D. Ill. * The Government filed a civil forfeiture action against the bank account used by Claimant to receive payment for electronic goods, such as iphones and ipads, sold to customers in the UAE, China, and Hong Kong. The complaint alleged that Claimant, a Chicago-based electronics wholesaler, knowingly purchased stolen and fraudulently-obtained mobile devices, repackaged them, and sold them to customers who transferred a total of $8 million to Claimant’s account. The “majority” of these payments, the complaint said, were for stolen and fraudulently-obtained devices, and it alleged that the money in the bank account was therefore subject to forfeiture as property involved in violations of 18 U.S.C. § 1956(a)(2)(A), the international money laundering statute, and/or represented the proceeds of violations of Sections 2314-15, the international stolen property statute. Claimant moved to dismiss the complaint for failure to allege sufficient facts under the pleading standard in Rule G(2)(f). It argued that the complaint did not allege facts that would be sufficient to prove that Claimant knew that the devices it purchased were stolen or fraudulently
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obtained, and that it did not state with any precision what fraction of sales were for illegally-obtained goods, or what Claimant’s profit margin might have been. But the court held that such detail was not necessary at the pleading stage of a civil forfeiture action. Noting that a complaint may not be dismissed “on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property,” 18 U.S.C. § 983(a)(3)(D), the court held that the complaint was detailed enough to allow Claimant to prepare a defense. Moreover, with respect to the knowledge requirement, the court held that the Government was not required, in its complaint, to show that Claimant sold devices that it knew were stolen or fraudulently obtained, “but only that there is a probability or substantial chance that it knew the devices were stolen or fraudulently-obtained.” Claimant responded that a provision of the Uniform Commercial Code allows a buyer to rely on the seller’s implied warranty of title, and that accordingly it was entitled to a presumption that it did not know that the electronic devices were stolen or fraudulently obtained. But the court held that while the UCC might provide a defense that Claimant could raise at trial, a claimant in a civil forfeiture action may not base a motion to dismiss the complaint on the possibility that it might have a defense. At the pleading stage, the court said, the focus is on the sufficiency of the complaint, not on the likely outcome of the litigation. Thus, the court denied the motion to dismiss. SDC Contact: AUSA Matthew Ebert Comment: The two key points in the court’s analysis are 1) that the Government may bring a
forfeiture action against all of the funds in a bank account without having to set forth precisely what fraction of the funds in that account were involved in or traceable to the underlying crime; and 2) with respect to the mens rea element of that crime, that the complaint need only show that there is a “substantial chance” that the perpetrator had the requisite knowledge or intent. The first issue in particular arises all the time when the Government can show that some substantial amount of illegally derived money came into a bank account, but cannot show at the pleading stage exactly what portion of the defendant funds will ultimately be subject to forfeiture. SDC Ancillary Proceeding / Summary Judgment
The leader of a motorcycle club cannot contest the forfeiture of the clubhouse without asserting that he personally has a legal interest in the property; that he maintains the property on behalf of the club is not sufficient.
Equitable interests are insufficient to establish a claim in the ancillary proceeding; the claimant must demonstrate that he has a legal interest in terms of state property law.
United States v. Knoll, ___ F.3d ___, 2015 WL 2167813 (7th Cir. May 11, 2015).
Seventh Circuit * Defendants, members of the Outlaws Motorcycle Club, pled guilty to a RICO offense and agreed to the forfeiture of two parcels of real property, including the Club’s clubhouse. Claimant, who became the leader of the Club after the offense giving rise to the forfeiture, filed a claim in the ancillary proceeding contesting the forfeiture of the two parcels. The Government moved for summary judgment.
The court granted the motion on two grounds. First, to the extent that Claimant had
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any interest at all in the forfeited properties, it arose when he became the leader of the Club after the events giving rise to the forfeiture. Thus, Claimant could only recover if he were able to establish that he acquired his interest as a bona fide purchaser for value, which he could not do.
Second, Claimant alleged only equitable interests in the property arising from his having accepted responsibility for maintaining the property as the Club’s clubhouse. He did not claim a legal interest in the property. The court held that such equitable interests do not qualify as a “legal right, title or interest” necessary to state a claim for relief under 18 U.S.C. § 1963(l)(6). United States v. Knoll, 2014 WL 4058721 (S.D. Ind. Aug. 15, 2014) (September 2014 Maryland Forfeiture Digest). Defendant appealed, but the panel affirmed the district court on precisely the same grounds. SDC
Contact: AUSA Bradley Blackington (S.D. Ind.)
Ancillary Proceeding / Standing / Alter Ego The defendant’s alter ego cannot file a claim in the ancillary proceeding, but due process requires that the entity found to be an alter ego in the forfeiture phase of the criminal trial be given the opportunity to contest that finding in the ancillary proceeding.
Fraud victims are unsecured creditors who lack standing to contest the forfeiture of the defendant’s property in the ancillary proceeding, but the victim of a theft or embezzlement is in a different position because he never voluntarily surrendered title to his property. United States v. Emor, ___ F.3d ___, 2015 WL 2061817 (D.C. Cir. May 5, 2015) D.C. Cir. * Defendant was the founder of a
private school that operated in the District of Columbia. He persuaded the school to send money to a company that he controlled, ostensibly to build a coffee shop on the school’s property, but converted the money to his own use. He was convicted of wire fraud and was ordered to forfeit several million dollars. In the course of the forfeiture and sentencing proceeding, the district court found that the school was Defendant’s alter ego. Hence, when the school attempted to file a claim in the ancillary proceeding to recover the money that Defendant obtained, the court held that it lacked standing. United States v. Emor, 2013 WL 3005366 (D.D.C. June 18, 2013) (because § 853(n)(2) limits claims to persons other than the defendant, the alter ego of the defendant may not file a claim) (August 2013 Maryland Forfeiture Digest). Moreover, the court held that even if the school were not Defendant’s alter ego, it could not file a claim because, as a fraud victim, it was merely an unsecured creditor with no legal interest in the forfeited property. Id. The school appealed. The first issue on appeal was the school’s standing. Noting that Article III standing and statutory standing under 21 U.S.C. § 853(n)(2) are different concepts, the court addressed each in turn. Article III standing, the court said, is relatively easy to establish. It was sufficient in this case that the school alleged that it was the owner of the forfeited funds and that but for the Government’s forfeiture action it would have been able to recover them from Defendant’s company. With respect to Section 853(n)(2), the panel held that the district court erred in refusing to revisit its alter ego ruling in the ancillary proceeding. A third party that is the defendant’s alter ego may not file a claim in the ancillary proceeding, but in this case the court found that
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the school was the defendant’s alter ego in the sentencing proceeding – a proceeding from which the school, as a third party, was excluded. Refusing to allow the school to challenge the alter ego finding in the ancillary proceeding – and relying on that finding to deny the school standing to make a claim – violated its right to due process. Moreover, the panel disagreed with the district court’s conclusion that the school, as a fraud victim, was merely an unsecured creditor with no legal interest in the forfeited property. True, most fraud victims are indeed unsecured creditors, but here the school alleged that although Defendant was convicted of wire fraud, he was actually guilty of embezzlement. The victim of an embezzlement or theft, the panel said, differs from a fraud victim in that it never voluntarily relinquishes title to its property. Thus, if the school is able to prove in the ancillary proceeding that Defendant’s crime was actually an embezzlement and that the school was the victim, it would be entitled to recover under Section 853(n)(6)(A). Accordingly, the panel reversed the district court and remanded the case to allow the school to refute the alter ego finding and to establish that it was the victim of an embezzlement. SDC Contact: AUSA Zia Faruqui Comment: I don’t agree with the panel that a claimant in the ancillary proceeding can establish Article III standing merely by alleging that if the Government had not forfeited the property, the claimant would have been able to recover it. But otherwise I think the court makes two valid points. The alter ego issue generally arises in two ways. First, there are times when it is necessary to invoke the alter ego theory to establish the
forfeitability of a given asset. For example, in United States v. BCCI Holdings (Luxembourg) S.A. (Petition of Banco Central Del Uruguay), 977 F. Supp. 27, 32 (D.D.C. 1997), the court held that an order forfeiting all assets of the defendant corporation applied to the assets of a sibling corporation that was the defendant’s alter ego. In the ancillary proceeding, however, a claimant that has been found to be the defendant’s alter ego must have the opportunity to contest that finding and thus to establish its standing as an independent entity. Thus, in BCCI, the court held that the sibling corporation had the right to show that it was not the alter ego of the defendant corporation even though the court had already made a contrary finding in issuing the forfeiture order in the first place. See Asset Forfeiture Law in the United States (2nd Ed. 2013), § 23-13(b). Regarding the difference between fraud victims and victims of a theft or embezzlement, it is well-established that fraud victims are unsecured creditors because they voluntarily transferred title to their property to the defendant and did not retain any interest in it. Id., § 23-13(c). It is different matter, however, if the property was taken involuntarily from the victim, as in a theft or embezzlement. Id. at n. 121 (listing cases recognizing the standing of embezzlement and theft victims). Such persons can recover in the ancillary proceeding because they have a pre-existing interest in the property that is superior to whatever interest the Government obtained at the time of the offense under the relation back doctrine. See 21 U.S.C. § 853(n)(6)(A). Thus, it was not unreasonable for the panel to remand this case to allow the school to attempt to refute the finding that it was the defendant’s alter ego and to establish that notwithstanding the defendant’s conviction for wire fraud, it was the victim of an embezzlement. SDC
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Ancillary Proceeding / Standing / IEEPA / Terrorism / Constructive Trust Private party who has obtained a judgment against the Republic of Cuba cannot use the ancillary proceeding in a criminal forfeiture case against a bank to satisfy her judgment, even though the bank’s criminal offense involved illegal dealings with Cuba.
United States v. BNP Paribas, S.A., 2015 WL 1962882 (S.D.N.Y. Apr. 30, 2015). S.D.N.Y. * Defendant, the international bank BNP Paribas, pled guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act, and agreed to pay a forfeiture money judgment in the amount of $8.8 billion. The amount was based on Defendant’s having processed and transferred over $6 billion to and from entities in Sudan, $687 million for entities in Iran, and $1.7 billion for entities in Cuba. After deducting amounts it owed to the State of New York and the Federal Reserve to which the Government consented, Defendant deposited $3.8 billion with the Government to satisfy the judgment. Claimant filed a claim in the ancillary proceeding, alleging the she had obtained a judgment against the Republic of Cuba for over $63 million for the torture and assassination of her father, and that the judgment should be satisfied out of the portion of the forfeited funds attributable to Defendant’s illegal transactions involving Cuba. The Government moved to dismiss the claim for lack of standing. The district court agreed that to the extent Claimant relied on the Terrorism Risk Insurance Act (TRIA) she lacked standing because TRIA only applies to assets that have been blocked by the Office of Foreign Asset Control (OFAC) and there were no blocked assets at issue in this case.
Further, the court held that because the assets in question belonged to BNP Paribas and not to Cuba, Claimant could have no interest in the forfeited funds. That the amount of the money judgment Defendant was ordered to pay was based in part on the value of the illegal transactions that Defendant conducted with entities in Cuba does not mean that any of the forfeited funds actually came from Cuba. The court also rejected Claimant’s argument that she should be regarded as the beneficiary of a constructive trust. “It is hornbook law,” the court said, that a beneficiary of a constructive trust must be able to trace her property to the property in the hands of the wrongdoer. Here, Claimant could not trace any of her own property to the money forfeited by BNP Paribas. Finally, the court pointed out that Rule 32.2(c)(1), F.R.Crim.P., provides that “no ancillary proceeding is required to the extent that the forfeiture consists of a money judgment.” The reason for that rule, the court said, is that because a money judgment is an in personam judgment against the defendant and not an order directed at specific assets, no third party would have an interest in contesting the money judgment. Claimant argued that the phrase “no ancillary proceeding is required” implied that the court had the discretion to conduct an ancillary proceeding if it wished to do so, even if the forfeiture consisted only of a money judgment. But the court held that even if that was so, it would not exercise its discretion to conduct a proceeding in which the claimant could show no cognizable legal interest. So Claimant’s claim was dismissed. SDC Contact: AUSA Andrew Goldstein
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Comment: For another case holding that TRIA does not apply if the forfeiture does not involve assets blocked by OFAC see United States v. All Funds on Deposit with R.J. O’Brien & Assoc., ___ F.3d ___, 2015 WL 1476044 (7th Cir. Apr. 2, 2015) (June 2015 Maryland Forfeiture Digest). SDC Ancillary Proceeding / Attorney’s Fees / EAJA Court grants third parties’ request for attorney’s fees under EAJA; because the Government should have known that the forfeited property was not traceable to the defendant’s offense, it was not substantially justified in opposing the third-party claims.
United States v. Bailey, 2015 WL 1893610 (W.D.N.C. Apr. 27, 2015). W.D.N.C. * After Defendant was convicted of a multi-million dollar investment fraud scheme, the court issued a preliminary order of forfeiture against certain assets. Claimants successfully contested the forfeiture of certain assets in the ancillary proceeding, United States v. Bailey, 2012 WL 569744 (W.D.N.C. Feb. 22, 2012) (Maryland Forfeiture Digest, May 2012), and petitioned the court for attorney’s fees under the Equal Access to Justice Act (EAJA). The Government opposed the award on several grounds. First, it argued that the claimants were not “prevailing parties” because the forfeiture order pertained only to the interests of LLCs that Claimants owned, and not to the interests of the individual claimants themselves. Thus, in the Government’s view, Claimants’ interests were never subject to forfeiture and it was unnecessary for them to have filed claims. But the court held that because the Government filed notices of lis pendens on the forfeited property, and because the individual claimants had a shared interest in the properties, the forfeiture order clouded their title and they were
therefore justified in filing claims. The Government also argued that its position throughout the ancillary proceeding was “substantially justified,” but again the court disagreed. The forfeited property, the court said, should never have been forfeited in the first place because the Government failed to show that there was any nexus between the property and Defendant’s offense. Rather, in the court’s view, the property was the commingled property of innocent investors. Thus, if the property was not connected to Defendant’s crime, the Government should have known from the outset that Claimants would be able to show that they had a superior interest in the property in terms of 21 U.S.C. § 853(n)(6)(A). In response to the Government’s attempt to explain its theory of forfeiture, the court agreed with Claimants that the Government’s position was “nonsensical.” Accordingly, the court granted the motion for attorney’s fees. SDC Contact: AUSAs Bill Brafford and Ben Bain-Creed Comment: In at least three previous case summaries, I have explained why I think the district court was wrong on the merits in granting the claimants’ petition under a constructive trust theory. Because I think the court was wrong on the merits, I think it is wrong in holding that the Government’s position was not substantially justified. SDC Adoptive Forfeiture / Holder Memo The Holder Memo on adoptive forfeitures applies only to adoptions that occur after January 16, 2015; it has no effect on civil forfeiture actions that were filled in federal court before that date. United States v. $54,052.10 in U.S. Currency, 2015 WL 3775894 (D. Md. June 16, 2015).
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D. Md. * Baltimore police seized $54,052 from Claimant’s residence and bank account pursuant to state search and seizure warrants and turned the money over to the DEA for forfeiture under federal law. The U.S. Attorney filed a civil forfeiture action against the money in December 2014, and Claimant filed a claim. On January 16, 2015, Attorney General Holder issued a policy memo prohibiting federal law enforcement agencies in the Department of Justice from adopting property seized by state and local law enforcement under state law, except in circumstances not applicable to this case. Citing that policy, Claimant filed a motion for summary judgment arguing that the Government no longer has the capacity to pursue a civil forfeiture action arising out of an adopted forfeiture, within the meaning of F.R.Civ.P. 9(a). The Government opposed the motion on the ground that the Holder Memo applies prospectively to adoptions that occur after January 16, 2015, and thus does not apply to this case. Alternatively, it argued that the Holder Memo does not confer any enforceable rights on private parties. The court agreed with the Government on the first point and thus did not reach the second. It is not entirely clear when an adoption occurs, the court said, but at the latest it must have occurred at the time the Government filed its civil forfeiture complaint in the district court. Claimant’s argument, that there is no adoption as long as the forfeiture proceeding is being actively contested, cannot be correct because it would mean that the court was exercising jurisdiction over property that the Government did not yet have under its control. So Claimant’s motion for summary judgment was denied. SDC Contact: Contract Attorney John Chung
Motion for Return of Forfeited Property Because 18 U.S.C. § 983(e) is now the exclusive vehicle for seeking judicial review of administrative forfeiture, older Eleventh Circuit cases allowing review under the APA are no longer good law.
United States v. Simon, ___ Fed. Appx. ___, 2015 WL 1868343 (11th Cir. Apr. 24, 2015). Eleventh Circuit * The DEA entered a declaration of forfeiture after Claimant failed to file a claim in an administrative forfeiture proceeding. More than a year later, Claimant moved for the return of his property under the Administrative Procedures Act (APA). The district court denied the motion and Claimant appealed. On appeal, the panel held first that 18 U.S.C. § 983(e) is the exclusive remedy for seeking judicial review of an administrative forfeiture, and that therefore Claimant was not entitled to review under the APA, Rule 41(g), or any other provision of law. To the extent that there was any precedent in the Eleventh Circuit for review under the APA, the court said, those cases were superseded by the enactment of Section 983(e) and were no longer good law. On the merits, the court held that Claimant could not prevail under Section 983(e) because the evidence in the record showed that Claimant had received actual notice of the forfeiture proceeding. SDC Contact: AUSA Madeleine Shirley (S.D. Fla.) Motion for Return of Forfeited Property / Claim and Answer The Government’s filing a new civil forfeiture action after a claimant successfully moves to
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vacate an administrative forfeiture under Section 983(e) does not deprive the claimant of due process.
The claimant’s prior successful motion to vacate the administrative forfeiture does not exempt him from the requirement to file a claim and answer if he wishes to contest the new civil forfeiture action.
United States v. $10,000 in U.S. Currency, ___ Fed. Appx. ___, 2015 WL 3482720 (3rd Cir. June 3, 2015). Third Circuit * Claimant moved to vacate the administrative forfeiture of his property under 18 U.S.C. § 983(e) on the ground that the Government did not send him proper notice at his place of incarceration. When the court granted the motion, the Government filed a new civil forfeiture action as authorized by Section 983(e)(2). Claimant did not file a timely claim in the forfeiture action but instead filed a motion for summary judgment. The district court held that Claimant lacked statutory standing and granted the Government’s motion for a default judgment. Claimant appealed. On appeal, the panel agreed with the lower court that Claimant's motion for summary judgment was no substitute for filing a valid claim under Rule G(5) because it failed to state under penalty of perjury that he was the owner of the defendant property. That Claimant had previously contested the administrative forfeiture proceeding, the court added, did not mean he was exempt from the pleading requirements in the new civil forfeiture case. Thus, Claimant lacked statutory standing. Moreover, the panel rejected Claimant’s argument that the Government’s filing of the new civil forfeiture proceeding after he successfully moved to vacate the defective administrative
forfeiture deprived him of due process. Claimant has not demonstrated, the court said, how the procedure authorized by the statute and followed by the Government deprived him of notice or an opportunity to be heard. SDC Contact: AUSA Marion Percell (D.N.J.) Scope of Criminal Forfeiture / Plea Agreement / Aggravated Identity Theft Court enters a forfeiture order for aggravated identity theft in violation of Section 1028A despite the absence of statutory authority to do so. When the Government and the defendant stipulate to the amount of a criminal forfeiture judgment, the Government is relieved of its obligation to establish the amount of the judgment by a preponderance of the evidence.
United States v. Pollard, 2015 WL 1982761 (D. Nev. Apr. 30, 2015). D. Nev. * Defendant was charged with bank fraud and aggravated identity theft in violation of 18 U.S.C. §§ 1344 and 1028A, respectively. He agreed to plead guilty to the Section 1028A offense and to the entry of a $4 million forfeiture money judgment.
Despite the plea agreement, the district court declined to enter the money judgment and the Government appealed. Finding that criminal forfeiture is a mandatory part of the defendant’s sentence in a criminal case, the Ninth Circuit reversed and remanded the case for the court to enter the money judgment. On remand, however, Defendant argued that the court should not impose the forfeiture judgment for several reasons.
First, he argued that because Congress failed to include any provision in Section 1028A authorizing forfeiture for aggravated identity theft,
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the court had no authority to order forfeiture for that offense, even though he agreed to it in his plea. The court held, however, that because Section 1028A references bank fraud under Section 1344 as one of the predicates for a Section 1028A offense, and because forfeiture is authorized for Section 1344, the court had the authority to order the forfeiture even though Defendant was convicted only of the Section 1028A offense.
Second, he argued that because the indictment only sought forfeiture in connection with the bank fraud offense, and not in connection with aggravated identity theft to which he pled guilty, the forfeiture order would violate the notice requirement in Rule 32.2(a). But applying the same reasoning, the court held that the notice that property would be forfeited in connection with the bank fraud offense satisfied the notice requirement with respect to Section 1028A.
Third, Defendant argued that his plea agreement only acknowledged the mandatory nature and hence the inevitability of forfeiture, and was not an agreement to it, but the court held that the agreement unambiguously set forth Defendant’s agreement to the forfeiture.
Finally, Defendant argued that the evidence was insufficient to support a forfeiture order in the amount of $4 million, but the court held that the parties’ stipulation to the amount of the forfeiture relieved the Government of the obligation to establish the amount by a preponderance of the evidence.
Accordingly, the court entered the forfeiture judgment in the full amount requested by the Government. SDC
Contact: AUSA Dan Hollingsworth
Comment: I find the district court’s argument in support of its authority to enter a forfeiture
judgment for a violation of Section 1028A to be interesting and creative, but I cannot say that I agree with it. Lots of statutes cross-reference other statutes so that a violation of one may serve as a predicate for the violation of the other, but there is no reason to believe that when it enacts such statutes, Congress intends that all of the penalties applicable to the predicate offense should apply to the offense that references it.
Rather, I believe that Congress simply dropped the ball when it failed to authorize forfeiture for violations of the aggravated identity theft statute, and that Congress needs to fix that problem before a court may order forfeiture as part of the sentence for that offense.
This case illustrates, by the way, the limitations of having a defendant agree to a forfeiture that is not actually authorized by statute. It is often said that if the parties and the court agree to do something, there is no harm in it. Here, however, the defendant agreed to the forfeiture of $4 million in connection with the aggravated identity theft offense but then reneged on his agreement when the opportunity to do so arose. That left the court in the position of having to invent a rationale to support the forfeiture that may or may not survive if the defendant decides to appeal.
If the defendant does appeal, the Government will doubtless argue that he is estopped by his plea agreement from challenging the court’s statutory authority to enter the forfeiture judgment, but there is no guarantee that an appellate court would accept that argument. Indeed, several years ago, the Seventh Circuit signaled that it might not. See United States v. Venturella, 585 F.3d 1013, 1016, 1017 (7th Cir. 2009) (noting that in the Seventh Circuit, a defendant’s agreement to a sentence not authorized by law is not binding on the defendant). In the end, it would have been better to have had the defendant plead to the
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bank fraud, for which criminal forfeiture is plainly authorized.
The final issue in the case was whether the defendant’s agreement to the amount of the forfeiture relieves the Government of the burden of establishing the forfeitability of the property by a preponderance of the evidence. The court held that it does, but as the next summary indicates, not all courts agree with that proposition. SDC
Guilty Plea / Evidence of Forfeitability The defendant’s consent to the entry of a criminal forfeiture judgment does not relieve the Government of its obligation to establish the nexus between the property and the offense by a preponderance of the evidence.
United States v. Beltramea, ___ F.3d ___, 2015 WL 2079765 (8th Cir. May 6, 2015). Eighth Circuit * Defendant pled guilty to money laundering, aggravated identity theft and other offenses arising out of an investment fraud scheme, and consented to the Government’s request for an order forfeiting various assets as property involved in the money laundering offense. On appeal, however, he argued that the district court committed plain error by issuing the forfeiture order without requiring the Government to establish a nexus between his offense and the forfeited property. The Government argued that Defendant waived his right to object to the forfeiture when he consented to the entry of the forfeiture order, but the panel held that a defendant’s consent does not abrogate the district court’s independent duty to ensure that the required nexus between the property and the offense of conviction exists. Because there was no evidence in the record showing that the Government had established the forfeitability of the property, the panel vacated
the forfeiture order and remanded the case to the district court. SDC Contact: AUSA Jacob Schunk (N.D. Iowa) Comment: As noted in the previous comment, some courts hold that the defendant’s stipulation to the forfeiture of his property relieves the Government of its burden to provide a factual basis for the forfeiture. See United States v. Boatner, 966 F.2d 1575, 1581 (11th Cir. 1992) (sentencing judge not required under Rule 11 to determine factual basis for defendant’s concession to criminal forfeiture pursuant to plea bargain); United States v. Ken International Co., Ltd., 113 F.3d 1243, 1997 WL 229114, *3 (9th Cir. 1997) (Table) (district court under no obligation to find factual basis for defendant’s agreement to criminal forfeiture). The Eighth Circuit plainly disagrees, but the panel does suggest that that it might be sufficient to have the defendant stipulate not only the forfeiture judgment itself but to a statement of facts supporting the forfeitability of the property. There was no such factual stipulation in this case. SDC Use of Forfeited Funds to Pay Informant An informant who claims that the Government promised him a share of the forfeited criminal proceeds if the defendant was convicted has a right to file an action to enforce the Government’s promise in the Court of Federal Claims.
Whether an AUSA has the authority to make such an agreement is an argument that the Government may raise in a motion for summary judgment.
Mendez v. United States, ___ Fed. Cl. ___, 2015 WL 3453925 (May 29, 2015). Fed. Cl. * Plaintiff was an informant in a drug / money laundering case that resulted in the
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conviction of the defendant and the forfeiture of a large sum of money. He alleged that an Assistant U.S. Attorney had verbally promised that he would receive an award payable from the forfeited funds, and that the agreement was never reduced to writing so that the Government would not have to reveal the agreement to the defendant as part of its discovery obligation in the criminal case. The Government denied that there was ever any such agreement and refused to pay the award. Plaintiff, however, was persistent: he tried to file a lien on the forfeited property and a claim in the ancillary proceeding, and when that proved unsuccessful, he filed a remission petition that AFMLS denied on the ground that Plaintiff was not a “victim” of the offense. Plaintiff then filed an action in the Court of Federal Claims to compel the Government to honor its agreement. The Government responded by moving to dismiss the action for lack of jurisdiction, again asserting that there was no agreement to pay Plaintiff any reward, and that even if such an agreement was made, the AUSA making the agreement had no authority to do so. The court held that Plaintiff had made a non-frivolous claim of an implied verbal contract that was cognizable under the Tucker Act, 28 U.S.C. § 1491(a)(1), and had offered a plausible explanation for the agreement’s not having been reduced to writing. Hence, the court held that it had jurisdiction over the cause of action. The Government’s arguments, the court said, went to the merits of the case and thus should be raised in a motion for summary judgment. So the motion to dismiss was denied. SDC Contact: AUSA Alison Lehr (S.D. Fla.)
Discovery A claimant who wants to obtain evidence from the Government’s investigative files that relates to his claim in a civil forfeiture case may serve the Government with a request for production under Rule 34 or a subpoena duces tecum under Rule 45, but may not attempt to serve the subpoena on the case agent personally.
United States v. 2121 Celeste Road SW, 2015 WL 3540182 (D.N.M. May 13, 2015). D.N.M. * The Government obtained an indictment against members of a drug trafficking organization (DTO) and filed a parallel civil forfeiture action against the real property used to facilitate the offense, viz., the distribution of heroin and cocaine. Claimant, who was the owner of the real property but not a criminal defendant, filed a claim opposing the forfeiture and served the Government with a Request for Production of Documents seeking all of the Government’s investigative files on the DTO. When the Government declined to respond to the request on the ground that it was overly broad, Claimant served the FBI case agent with a Rule 45 subpoena to produce the files herself. When she declined to do so, Claimant moved for a finding of contempt. The court held, as a procedural matter, that Claimant erred in serving the subpoena on the FBI agent who, despite being the case agent, did not personally have custody or control of the subpoenaed documents. What Claimant should have done, the court said, is either to have moved to compel the Government’s compliance with the Request for Production, or to have served the Rule 45 subpoena on the Government itself. Thus, Claimant’s request for a finding of contempt was denied. In any event, the court reached the merits and accepted the Government’s offer to provide
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all information in its files that related to Claimant, all information it was planning to use at trial, and all information obtained regarding the DTO prior to the date of the criminal indictment. It denied Claimant’s request for any post-indictment information on the ground that it could jeopardize continuing investigations. SDC Contact: AUSA Steve Kotz Comment: The court’s resolution of the narrow discovery issue is interesting, but the true value of the case is the court’s lengthy and interesting discussion of the purposes and limits of discovery in a civil forfeiture case. Anyone looking to support the argument that civil discovery, while broad, is not intended to provide the parties with a fishing license will want to read this opinion and keep a copy of it handy. SDC Discovery / Rule 37 Sanctions Court dismisses claim of foreign claimant who was ordered to travel to the United States to appear for a deposition but refused to do so.
United States v. All Funds on Deposit at Old Mutual of Bermuda, Ltd., 2015 WL 3883979 (S.D. Tex. Jan. 29, 2015). S.D. Tex. * Two corrupt Mexican officials were indicted in Texas on money laundering charges. One was arrested in Texas while the other remained a fugitive in Mexico. The Government also filed a related civil forfeiture action against the contents of a bank account in Bermuda, alleging that the corrupt officials laundered the proceeds of their Mexican public corruption offense by transferring the money from Mexico to Bermuda through a bank account in Texas. The fugitive and his wife filed claims and moved to stay the civil case pursuant to 18 U.S.C. § 981(g), but the court dismissed the fugitive’s claim under the fugitive
disentitlement doctrine, 28 U.S.C. § 2466, and denied the motion to stay. United States v. All Funds on Deposit at Old Mutual of Bermuda, Ltd., 2014 WL 4101212 (S.D. Tex. June 5, 2014) (Report and Recommendation), adopted by the district court 2014 WL 4101215 (S.D. Tex. Aug. 18, 2014). The wife remained in the case and filed a motion for a protective order, arguing that she should not be compelled to enter the United States for the purpose of her deposition. But the court denied the motion and ordered the wife to appear. Id. Finally, when the wife failed to appear for her deposition four times, the Government moved to dismiss her claim as a sanction under Rule 37. The court concluded that her failure to appear was willful, that she was unlikely ever to appear, and that accordingly the dismissal of her claim was appropriate. So the court granted the Government’s motion. SDC Contact: AUSA Julie Hampton Stay of Civil Discovery Court stays civil discovery in a federal civil forfeiture case to avoid interfering with a state murder prosecution. A civil forfeiture case and a murder prosecution are “related” for purposes of § 981(g) if the murder arose out of the drug-trafficking activities that are the basis for the forfeiture action.
United States v. $160,280.00 in U.S. Currency, 2015 WL 3607790 (D. Md. June 9, 2015). D. Md. * The DEA was investigating a Drug Dealer when it learned that he had been murdered in his home. Executing a search
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warrant obtained on the day of the murder, agents found $160,280 in a safe in Drug Dealer’s residence. The Government filed a civil forfeiture action against the money, alleging that it was drug proceeds. Claimant, Drug Dealer’s Estate, filed a claim contesting the forfeiture and served the Government with discovery requests. The Government responded by moving for a stay of civil discovery pursuant to 18 U.S.C. § 981(g)(1), asserting that discovery would adversely affect the pending state prosecution of the person accused of Drug Dealer’s murder. Claimant opposed the stay on two grounds. First, it argued that the federal forfeiture case and the state murder prosecution were not “related” because there were neither common parties nor a factual connection between the forfeiture of the funds and the Drug Dealer’s murder. But the court held that the cases were related both because the testimony of the officers who executed the search warrant on the night of the murder would be relevant to both cases, and because according to the Government’s complaint, the murder arose out of the drug trafficking activity that was the basis for the forfeiture action. Claimant also argued that civil discovery would not adversely affect the murder prosecution because the State had an open-file policy and had already disclosed all of its evidence to the defense, but the court held that discovery in the civil forfeiture case would include depositions, interrogatories and affidavits “that would be broader than what the defense would receive from law enforcement officers in the criminal case.” Accordingly, the court granted the stay until the conclusion of the state criminal trial. SDC Contact: AUSAs Stef Cassella and Evan Shea
Comment: Implicit in the court’s opinion is an issue that not long ago was considered unresolved: that a federal forfeiture case may be stayed to avoid interference with a state criminal prosecution. SDC Fugitive Disentitlement Doctrine Court dismisses claims of two defendants who fled to the Middle East rather than face criminal charges but attempted to contest the civil forfeiture of the property they left behind. Avoidance of criminal charges need not be the only reason a defendant has refused to reenter the U.S.; that it is one reason among others is sufficient to support the dismissal of his claim. United States v. $526,695.24 Seized from JP Morgan Chase Bank Investment Account, 2015 WL 2239111 (N.D. Ohio May 12, 2015) and 2015 WL 2239071 (N.D. Ohio May 12, 2015). N.D. Ohio * Two Defendants were indicted on drug charges arising out of their operation of pharmacies in Ohio. When they fled with their families to Israel and failed to return to the United States, the Government filed a civil forfeiture action against various assets that they had left behind. Both Defendants, their wives, and a corporation wholly owned by one of the Defendants filed claims to the property, but the Government moved to strike the claims of Defendants and the corporation under the fugitive disentitlement doctrine, 28 U.S.C. § 2466. Defendants opposed the motion on the ground that the Government could not show that the reason they had not returned to the U.S. was to avoid facing the criminal charges. Defendant One argued that the reason he failed to return to the United States was that he was engaged in litigation concerning his Israeli
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citizenship, and was concerned that he would lose his citizenship if he traveled out of that country. The court acknowledged that Defendant One was in fact engaged in such litigation and that it might be one reason why he was reluctant to return to the U.S. But it held that the Government does not have to show that avoiding criminal prosecution is the sole reason for a person’s refusal to travel. Rather, it is sufficient if avoiding prosecution is one reason for his refusal to do so. Here, the court noted that Defendant One had previously traveled to the U.S. while the Israeli citizenship issue was being litigated and that there was no reason to believe that he could not do so again. Thus, the court found that Defendant One had made a conscious choice not to reenter the U.S. to avoid criminal prosecution and granted the Government’s motion. Defendant Two argued that he left the U.S. in the first place to care for family members in the Middle East and that he had not returned because of ongoing violence in areas controlled by the Palestinian Authority. But the court noted that Defendant Two’s wife had returned safely to the U.S. and that Defendant Two himself had offered to return if a favorable plea bargain could be struck. Thus, the court concluded that Defendant Two had likewise made a conscious choice not to return to the U.S. to avoid criminal prosecution and granted the Government’s motion both as to him and as to the corporation that he controlled. SDC Contact: AUSA Phillip Tripi Rule 41(g) Motion / Administrative Forfeiture District court holds that because the seizure of property automatically commences an administrative forfeiture proceeding, the claimant cannot use a Rule 41(g) motion to contest the seizure, even if the Government has not yet sent
notice of the forfeiture proceeding.
United States v. Ali, ___ F.R.D. ___, 2015 WL 2159335 (N.D. Ala. May 5, 2015). N.D. Ala. * When Defendant was arrested on drug charges, the Government obtained seizure warrants and seized money from several of his bank accounts. Almost immediately, and before the seizing agency sent notice of any administrative forfeiture proceedings, Defendant filed a Rule 41(g) motion for the return of his property. The Government opposed the motion The parties agreed that relief under Rule 41(g) is not available once a forfeiture action has been commenced, but Defendant argued that that rule was inapplicable to this case because no forfeiture action had yet been commenced. The court held, however, that under the Third Circuit’s decision in Langbord v. U.S. Dept. of the Treasury, an administrative forfeiture begins automatically whenever property is seized. Thus, although the seizing agency had not yet sent notice of any forfeiture proceeding, one had already been commenced and the motion was therefore barred. Alternatively, the court held that even if the Rule 41(g) motion were properly before the court, it should be denied because Defendant had the right to file a claim under 18 U.S.C. § 983(a)(2) contesting the administrative forfeiture and thus had an adequate remedy at law. SDC Contact: AUSA Amanda Wick Comment: Unfortunately, though this is a win for the Government, I think the court’s analysis is completely wrong. It is common ground that once the Government has commenced a forfeiture proceeding, the property owner has an adequate remedy at law – viz., filing a claim – and that accordingly the court may not grant relief under Rule 41(g). See
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Asset Forfeiture Law in the United States (2nd Ed. 2013), § 3-8(a). In this case, the court denied the Rule 41(g) motion on the ground that the seizure of the defendant’s property automatically commenced an administrative forfeiture proceeding, even though the seizing agency had not yet sent or published notice under 18 U.S.C. § 983(a)(1). The court based that ruling on Langbord v. U.S. Dept. of Treasury, ___ F.3d ___, 2015 WL 1741451 (3rd Cir. Apr. 17, 2015), which held that administrative forfeiture proceedings begin automatically with the seizure of property, and that the CAFRA deadlines therefore apply whenever a person makes a request for the return of seized property whether the Government has commenced an administrative forfeiture or not. But Langbord is wrongly decided: what commences an administrative forfeiture proceeding is not the seizure of the property but the sending of notice – which the Government is not required to do until 60 days have elapsed from the date of the seizure. See Comment following the summary of Langbord in the May 2015 Maryland Forfeiture Digest. Indeed, the Government’s request for a rehearing en banc in that case is presently pending in the Solicitor General’s Office. For that reason, the district court in this case was wrong to suggest both that the Rule 41(g) motion was barred because there was already a forfeiture proceeding underway, and that the defendant was entitled to file a claim under Section 983(a)(2) without waiting for the Government to commence a proceeding by sending notice under Section 983(a)(1). As discussed in Asset Forfeiture Law in the United States at § 3-8(b), a property owner does have a window of opportunity to file a Rule 41(g) motion between the time his property is seized and the time the Government commences a forfeiture proceeding. Most courts will withhold ruling on the motion until it becomes moot when the Government commences its forfeiture
proceeding, id., but the window of opportunity does provide a safety valve that allows a court to correct a clearly erroneous deprivation of property immediately after the deprivation occurs. Otherwise, there would be a due process argument of the kind the Supreme Court seems primed to address. Id. at § 3-8(e). SDC Notes Joint and Several Liability United States v. Madrid, ___ Fed. Appx. ___, 2015 WL 3875435 (5th Cir. June 24, 2015). Fifth Circuit * Defendant was convicted of bribing a public official to obtain a contract, in violation of 18 U.S.C. § 666, and was ordered to forfeit $550,000 in proceeds. He appealed, arguing that it was error to hold him liable for amounts received by co-defendants and not by him personally, but the panel held that a court may order a defendant to forfeit proceeds received by others “who participated jointly in the crime,” provided those proceeds were reasonably foreseeable to the defendant. Contact: AUSA Joseph Gay (W.D. Tex.) Money Laundering / Sentencing United States v. Vu, ___ Fed. Appx. ___, 2015 WL 3505213 (6th Cir. June 2, 2015). Sixth Circuit * To be subject to the “leader/organizer” enhancement under the U.S. Sentencing Guidelines, the defendant in a money laundering case must have been the leader or organizer of the money laundering offense, not of the underlying SUA, but a money laundering defendant who instructed others where to deposit the drug proceeds and otherwise controlled the money was properly subject to the enhancement.
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Contact: W.D. Mich. Money Laundering Forfeiture United States v. Tyson, No. 3:12cr239-GCM (W.D.N.C. May 26, 2015) W.D.N.C. * Defendant used his business to launder the proceeds of an investment fraud scheme. Therefore, because the business itself was forfeitable as property involved in a money laundering offense, so were all of the assets seized from the business’s bank accounts. Contact: AUSA Ben Bain-Creed Summary Judgment United States v. 10338 Marcy Road NW, 2015 WL 3409258 (S.D. Ohio May 27, 2015). S.D. Ohio * The Government moved for summary judgment against a residence allegedly purchased with drug proceeds. The court found that Claimant’s status as a drug dealer, his lack of legitimate income and any employment history, and his prior drug conviction established the forfeitability of the property and granted the motion. Contact: AUSA Deborah Sanders Claim and Answer United States v. Various Real Properties (Jones), 2015 WL 3465831 (D. Md. May 27, 2015). D. Md. * The Government informally waived the deadline for Claimant to file a claim in a civil forfeiture proceeding, but when settlement negotiations broke down, it rescinded the waiver, gave Claimant an additional 10 days to file a claim, and moved for an interlocutory sale.
Claimant responded with a motion to stay the case, but the court held that because Claimant did not file a claim, he lacked standing to file his motion, and granted the motion for interlocutory sale as unopposed. Contact: AUSA Richard Kay Ancillary Proceeding / Discovery United States v. Natalie Jewelry, 2015 WL 2356896 (S.D. Fla. May 15, 2015). C.D. Fla. * The court authorized the parties to conduct discovery in the ancillary proceeding of a criminal case, and Claimant accordingly served a non-party with a Rule 45 subpoena. The non-party resisted the subpoena, but the court held that serving a Rule 45 subpoena on a non-party falls within the scope of the discovery permitted in the ancillary proceeding and denied its motion to quash. Contact: AUSA Arimentha Watkins