§195 Proceeds, Generally
Alabama District Court
Florida District Court
Illinois District Court
Kansas District Court
Louisiana District Court
Massachusetts District Court
Texas District Court
Tennessee District Court
Wyoming District Court
Supreme Court holds RICO forfeitures not limited to “interest” in the RICO “enterprise,” but may include proceeds and profits of illegal activity. (195) Defendant was convicted of violating the RICO statute, 18 U.S.C. §1962, for his participation in an arson-for-profit scheme in which buildings were burned to obtain insurance proceeds. The jury returned special verdicts for forfeiture under 18 U.S.C. § 1963(a) of insurance payment to the defendant. In a unanimous opinion by Justice Blackmun, the Supreme Court rejected the defendant’s argument that criminal forfeitures under the RICO statute are limited to “interest” in the racketeering “enterprise.” The court held that the phrase “any interest [the defendant] has acquired in violation of §1962” should be interpreted broadly and embraces both proceeds and profits of the underlying criminal activity. Russello v. U.S., 464 U.S. 16, 104 S.Ct. 296 (1983).
1st Circuit upholds forfeiture of entire amount of laundered money, rather than net profit, from substitute assets. (195) Defendants participated in a large organization that laundered money for Colombian drug traffickers. During a 15-month period, conspirators wired over $136 million to foreign bank accounts controlled by the Colombians. The district court ordered the forfeiture of $136 million under one of RICO’s forfeiture provisions, holding several conspirators liable for the full $136 million, and others liable for lesser amounts. Because the $136 million had been wired out of the country, each defendant was liable to pay the forfeited amount out of substitute assets. The First Circuit agreed that the $136 million wired to the Colombians constituted racketeering “proceeds” forfeitable by the persons who handled or controlled these funds before they were wired. Moreover, a defendant’s forfeiture extends to funds obtained by other members of the conspiracy, provided such funds were reasonably foreseeable to that defendant. Such a forfeiture did not constitute an excessive fine. It is quite rational to hold a defendant liable for an amount of money foreseeably laundered by himself and his own co-conspirators. U.S. v. Hurley, 63 F.3d 1 (1st Cir. 1995).
1st Circuit approves forfeiture of all funds laundered rather than organization’s profit. (195) Defendant ran an organization that laundered over $100,000,000 in drug money during a five year period. He argued that the proceeds subject to RICO forfeiture should not include all the funds laundered by his organization, but only the organization’s profit. The First Circuit, without discussion, upheld the forfeiture of all of the funds laundered by the organization. The appellate court agreed with the reasoning in the district court’s opinion. U.S. v. Saccoccia, 58 F.3d 754 (1st Cir. 1995).
1st Circuit holds that claimant is not entitled to reimbursement for improvements added to property after commission of drug crimes. (195) The drug transactions giving rise to the forfeiture occurred during December 1988 and January 1989. Prior to that time, defendant had begun remodeling his house. Despite his arrest on January 10, 1989, defendant continued to install improvements on the property. Defendant contended that the improvements made after January 10, 1989 did not fall within the definition of real property used to facilitate a drug transaction, and sought reimbursement from the government for the value of the improvements. The 1st Circuit upheld the summary denial of defendant’s claim. All title and interest in the property vested in the United States upon the commission of the drug crimes. Once this occurred, defendant could not retain or acquire any interest in the property. The court acknowledged that the same rule might not apply to a proceeding under §881(a)(6), which provides for the forfeiture of property purchased with drug proceeds. U.S. v. Land and Building at 2 Burditt Street, Everett, Massachusetts, 924 F.2d 383 (1st Cir. 1991).
1st Circuit rules that claimant’s legitimate sources of income were too small to defeat government’s probable cause showing. (195) The government filed affidavits showing that from 1979 to 1988 the claimant and his wife had an average annual adjusted gross income of $27,000 but made purchases totaling in the millions of dollars. The government’s affidavit also alleged that the claimant had been involved in cocaine and marijuana trafficking, and that a search of the house in 1988 uncovered 14 pounds of marijuana, guns and a triple beam scale. The claimant argued that the record showed that he had “substantial sources of legal income and that the government could not forfeit his properties unless it established a “concrete nexus” between the properties and particular drug transactions. The 11th Circuit found the government’s showing sufficient. “Given the government’s comprehensive and particularized showing of probable cause . . . the burden shifted to [claimant] to produce facts establishing such a claim.” The claimant failed to point to any evidence in the record indicating a legitimate source for the purchase of any of his properties. U.S. v. Parcels of Land, Etc., Et al., 903 F.2d 36 (1st Cir. 1990).
2nd Circuit holds that government waived right to assert a “traceable proceeds” theory as to entire bank account. (195) The government seized a bank’s interbank account. In a civil forfeiture motion under 18 U.S.C. §981, the government alleged that Colombian drug cartels used money orders to launder money through the interbank account. Although only about $1.7 million of the funds came from money orders, the government sought forfeiture of the entire $7 million in the account on the grounds that the non-laundered funds became “involved” in money laundering by providing cover for the deposits attributed to money orders. When the district court rejected this claim, the government moved for reconsideration, claiming that it had established probable cause to seize the entire account on a “traceable proceeds” theory. The district court held that the government had waived its right to assert a “traceable proceeds” theory, and the 2nd Circuit agreed. It was not until several weeks after the hearing on the bank’s motion that the government asserted it was proceeding on a traceable proceeds theory. The government raised this theory too late to be considered by the court. Marine Midland Bank v. U.S., 11 F.3d 1119 (2d Cir. 1993).
2nd Circuit says affidavit established probable cause to seize funds in interbank account. (195) The government seized a bank’s interbank account. The warrant was supported by the affidavit of a postal inspector which described in detail the postal service’s investigation of the drug cartel’s use of money orders to launder narcotics proceeds through the interbank account. The 2nd Circuit held that the affidavit established probable cause to seize the funds in the interbank accounts that were attributable to money orders. The affidavit was not the functional equivalent of a drug courier profile. It was the result of a 13-month investigation into the Colombian drug cartel’s laundering scheme. The affidavit described a specific modus operandi, and was not a mere profile compiled from the general behavior of drug cartels. However, the court remanded for a determination of whether 18 U.S.C. §984 required the release of the funds derived from money orders. Marine Midland Bank v. U.S., 11 F.3d 1119 (2d Cir. 1993).
2nd Circuit upholds release of nonforfeitable funds prior to trial. (195) The government seized a bank’s interbank account which contained about $7 million. About $1.7 million was attributable to deposits of money orders which the government alleged were used by Colombian drug cartels to launder money through the interbank account. The district court rejected the government’s claim that the entire account was forfeitable, and ordered the government to return to the bank the funds that were not attributable to money orders. The 2nd Circuit upheld the release of funds prior to the forfeiture trial. There was no support for the government’s contention that it was entitled to retain the illegally seized funds until a forfeiture trial. Although it would be senseless to order the release of funds if the government could immediately commence a forfeiture proceeding and establish probable cause, there was no indication that it could. Marine Midland Bank v. U.S., 11 F.3d 1119 (2d Cir. 1993).
2nd Circuit says probable cause only requires a nexus between seized property and illegal drug activity. (195) Under 2nd Circuit forfeiture caselaw, to establish probable cause, the government must have reasonable grounds to believe the property is subject to forfeiture, and these grounds must rise above the level of “mere suspicion.” Here, the 2nd Circuit noted that there was an apparent contradiction in formulations of how far above “mere suspicion” the probable cause burden lies. Although several cases have suggested that “a substantial connection” must be shown between the property and the illegal activity, the court found that “the weight of authority” in the 2nd Circuit requires the government only to demonstrate a “nexus” between the seized property and the illegal drug activity. To show that nexus when the res is a bank account, the government must establish that there is probable cause to believe the funds represent proceeds traceable to drug transactions; it is not required to link the monies to any one particular transaction. Here, the evidence was more than sufficient to link funds being electronically transferred to Colombia to illegal drug trafficking. U.S. v. Daccarett, 6 F.3d 37 (2d Cir. 1993).
2nd Circuit remands to determine probable cause to forfeit bank accounts. (195) In a civil forfeiture action against real property and bank accounts, the district court ordered the forfeiture of the real property, but found that the government had not traced the money in the bank account to drug trafficking. The 2nd Circuit remanded because it was unclear whether the court had found (a) no probable cause to forfeit the accounts, or (b) that claimants had shown that the accounts did not contain drug proceeds. As the trial began, the judge announced that the probable cause requirement had been met by the government. The finding was not limited to the property, so the government presented no further evidence. The court’s later finding was contrary to this initial ruling. The case was remanded to determine whether probable cause existed for the forfeiture of the accounts. The court noted that on remand, probable cause could be based on circumstantial evidence and the funds need not be linked to specific drug transactions. U.S. v. All Right, Title, and Interest in Real Property and Appurtenances Thereto Known as 785 St. Nicholas Ave., 983 F.2d 396 (2d Cir. 1993).
2nd Circuit holds that funds being electronically transferred are seizable. (195) The government seized funds being electronically transferred (EFTs) by a Colombian drug cartel from United States banks to Colombian and Panamanian banks. The government sought forfeiture of the funds as proceeds of drug trafficking and money laundering activity. Claimants argued that EFTs were not seizable properties under the civil forfeiture statute because they were merely electronic communications. They claimed that an EFT was not a direct transfer of funds, but rather a series of contractual obligations to pay, and that the intermediary banks were merely messengers who never held the funds. The 2nd Circuit rejected this characterization, and held that an EFT, when it takes the form of a bank credit at an intermediary bank, is clearly a seizable res under the forfeiture statutes. On receipt of EFTs from the originating banks, the intermediary banks possess the funds, in the form of bank credits, for some period of time before transferring them on to the destination banks. Under Circuit precedent, a bank credit is a seizable res. U.S. v. Daccarett, 6 F.3d 37 (2d Cir. 1993).
2nd Circuit finds probable cause where claimant purchased property with large sums of cash in excess of legitimate income. (195) Claimant argued that his guilty plea to drug charges was insufficient to establish probable cause that certain properties were the proceeds of a narcotics exchange, because the activities for which he was convicted occurred after he had purchased most of the property. The 2nd Circuit rejected this argument, noting that the government need only have probable cause to connect the property to drug activity. It need not link the property to a particular transaction. In this case, probable cause was established by several factors. First, claimant was arrested with heroin that was 90 percent pure, from which the district court could reasonably infer that claimant occupied a fairly high position on the drug distribution chart and that he had been involved in illegal activities for a substantial period of time prior to his actual arrest. Second, almost all of the properties were purchased with large sums of cash, in an amount that greatly exceeded claimant’s legitimate after-tax income. Third, many of claimant’s cash payments for the property were made with five, ten and twenty dollar bills. Finally, claimant made various false statements about his purchases, including listing a false social security number. U.S. v. 228 Acres of Land and Dwelling Located on Whites Hill Road in Chester, Vt., 916 F.2d 808 (2d Cir. 1990).
3rd Circuit holds that “proceeds,” as used in money laundering statute, means gross receipts rather than profits. (195) Defendant was convicted of money laundering violations. On appeal, he argued that the term “proceeds” in the money laundering statute encompasses only the net profits, and not the gross receipts, of criminal activity. The 3rd Circuit held that “proceeds” means gross receipts rather than profits. By reinvesting proceeds of his fraudulent scheme in order to sustain it, the defendant promoted unlawful activity, within the meaning of the money laundering statute, regardless of whether the funds were profits or gross receipts. Affirmed. U.S. v. Grasso, 2004 WL 1874620 (3rd Cir., Aug. 23, 2004).
3rd Circuit holds laundered money commingled with untainted money may be directly forfeited. (195) Defendant was convicted of fraud, money laundering, and racketeering charges, and was ordered to forfeit substantially all his assets, including a brokerage account into which he had transferred $3 million in fraudulently obtained funds. Citing U.S. v. Voigt, 89 F.3d 1050 (3d Cir 1996), the district court held that this account was not forfeitable directly, pursuant to 18 U.S.C. §982(a)(1), as property derived from or traceable to money laundering because the account also contained $160,000 in untainted funds. Instead, the trial judge ordered the money in the account forfeited as substitute assets under 18 U.S.C. §982(b)(1). On appeal, the Third Circuit conceded that Voigt appeared to preclude direct forfeiture even of readily traceable laundered funds once commingled with any sum of untainted money. However, the court categorized that section of Voigt as dictum, and found that Voigt applies only to cases in which tainted and untainted funds cannot be readily separated. As there was no such difficulty in this case, the circuit court found the $3 million in the account directly forfeitable, less amounts used to pay attorneys fees. U.S. v. Stewart, 185 F.3d 112 (3d Cir. 1999).
4th Circuit okays forfeiting cars as proceeds where indictment alleged facilitation. (195) Defendant pleaded guilty to drug trafficking crimes and agreed to forfeit certain vehicles. Defendant’s girlfriend challenged the forfeiture in a third-party claim under 21 U.S.C. ? 853. She argued, inter alia, that the district court erred in ordering forfeiture of the cars on the theory that they were purchased with drug trafficking proceeds when the indictment alleged they were forfeitable because used to facilitate drug trafficking. The Fourth Circuit held that the court was not limited by the theory asserted in the indictment. “[W]hether the property was forfeited because it facilitated [defendant’s] drug activities or was purchased from drug proceeds is irrelevant, as either prong justifies the forfeiture.” U.S. v. Holmes, 133 F.3d 918 (4th Cir. 1998) (table) (unpublished).
5th Circuit says funds forfeited need not be traced to specific RICO violation. (195) Defendants were convicted of RICO charges stemming from a scheme to defraud banks through fraudulent real estate loans. Defendants were assessed $40 million and $38 million forfeiture penalties based on amounts received by them, their companies and family members. Defendants argued they should not be forced to forfeit amounts that went to their families and companies. The 5th Circuit affirmed the forfeiture orders, finding sufficient evidence that defendants “acquired or maintained” the amount forfeited. Contrary to defendants’ suggestion, the amounts subject to forfeiture need not be directly linked or traced to the specific acts proved. Forfeiture should reflect the scope of the offense. Here, sufficient evidence was offered as to the profits earned by defendants to support the forfeiture order. U.S. v. Faulkner, 17 F.3d 745 (5th Cir. 1994).
5th Circuit affirms that jury’s special verdict adequately identified assets to be forfeited. (195) The 5th Circuit rejected defendant’s argument that the jury’s special verdict regarding the forfeiture of his car business inadequately specified the property that had been forfeited in violation of Fed. R. Crim. P. 31(e). The jury found that the business had been used to control, and had been purchased with the proceeds of, a continuing criminal conspiracy. This finding identified with sufficient specificity the asset subject to forfeiture. The jury was under no obligation to select only certain of the entity’s assets for forfeiture. If any part of the business was purchased by, or used to control, the proceeds of a continuing criminal conspiracy, then the entire property was subject to forfeiture. U.S. v. Puma, 937 F.2d 151 (5th Cir. 1991).
5th Circuit upholds forfeiture of claimant’s car purchased with boyfriend’s drug money. (195) The government alleged that the claimant’s boyfriend, a convicted drug dealer, had given her the money to from the proceeds of his illicit drug trafficking purchase the automobile. The government showed that the girlfriend earned only $700 per month and purchased the car in July 1986 with a $9,000 down payment. Her check was returned for insufficient funds, and she then made the down payment in cash in small bills. She paid the balance in January 1988 with a check for $8,300. That money came from a deposit the day before. Her largest prior deposit had been $300. There was also testimony that the boyfriend had said that he bought the car for the claimant. The 5th Circuit held that this evidence was sufficient to support the trial judge’s finding that the car was forfeitable to the government. U.S. v. One 1986 Nissan Maxima GL., 895 F.2d 1063 (5th Cir. 1990).
5th Circuit rules circumstances supported finding of probable cause to forfeit currency. (195) The 5th Circuit held there was probable cause to forfeit over $300,000 seized from a camper truck because there existed probable cause to believe the money was substantially connected to drug trafficking. The facts showed that (1) the truck was purchased for cash at an auction by two unidentified men, (2) investigators could not determine the existence of the person in whose name the truck was purchased, (3) the money was packaged in bundles of small bills which was characteristic of large drug deals, (4) cocaine was found on the driver, and (5) the driver took significant steps to shield his superiors from detection. Under these circumstances the trial court’s determination of probable cause was not erroneous. Moreover, given the lack of a claimant with standing to challenge the forfeiture, summary judgment was proper. $321,470 U.S. Currency, 874 F.2d 298 (5th Cir. 1989).
5th Circuit holds proceeds from drug smuggling are properly taxable as gross income. (195) Defendant filed suit in district court for a refund of back taxes which the tax court had assessed against him after he admitted that some $600,000 in income was earned as a result of marijuana smuggling. The 5th Circuit held that even though the funds had been forfeited to the government, they were taxable income because the defendant had asserted dominion and control over the funds prior to forfeiture. Wood v. U.S., 863 F.2d 417 (5th Cir. 1989).
Sixth Circuit holds that cumulation of evidence supported established drug connection with currency and claimant was not “penalized” for invoking Fifth Amendment to government’s discovery. (195, 690) Cleveland police officers spotted a pickup truck parked in a driveway with its engine running and saw Barry Joseph asleep in the fully-reclined driver’s seat. The officers tapped on the vehicle’s windows for several minutes before Joseph awoke and lowered his window, when the officers smelled marijuana. The officers recovered a plastic sandwich bag containing 11.89 grams of marijuana from his pocket. An inventory search of the vehicle uncovered $110,873 rubber banded together, and a drug-detecting dog alerted to the currency. On two previous occasions, police found Joseph with bags of marijuana and cash, and $21,211 eventually was forfeited to the government as drug proceeds in Ohio; and Pennsylvania officials sought forfeiture of $15,397. In the most recent case, the federal government filed a forfeiture complaint and during discovery, in response to the government’s interrogatories about his work history and how he obtained the $110,873, Joseph invoked his Fifth Amendment rights. While the case was pending, however, Joseph died (apparently as a result of multiple gunshot wounds), and the court ordered his estate’s administratrix to be substituted as the claimant. The district court ultimately granted the government’s motion for summary judgment. On appeal, the Sixth Circuit held that the officers had ample reason to stop and question Joseph because he was asleep in an idling car in the middle of the night, and they had probable cause to detain him and search his car because he acknowledged possessing marijuana. The Court also held that the cumulation of this evidence satisfied the government’s burden of establishing a connection between the currency and drug offenses because of the unusually large amount of currency; Joseph filed no state income tax returns from 1994 to 2002; the presence of drugs at the scene; an alert by a drug-detecting dog to the currency; and the two previous incidents. Finally, the Court held that district court did not penalize Joseph for exercising his Fifth Amendment rights because he had an opportunity to present his side of the case, but he simply chose to remain silent to avoid the Federal Rule of Civil Procedure 56 summary judgment requirements. U.S. v. $110,873.00 in U.S. Currency, 2005 WL 3271312 (6th Cir. 2005) (Nov. 30, 2005).
6th Circuit applies preponderance standard in criminal forfeiture not limited to proceeds cases. (195) Following defendant’s criminal conviction, the government sought criminal forfeiture of some of defendant’s property under 21 U.S.C. §853(a). Following precedent in other circuits, the 6th Circuit held that the forfeitability of defendant’s property need be shown only by a preponderance of the evidence, not by proof beyond a reasonable doubt. The court noted but rejected the argument that the preponderance standard should apply only to “proceeds” forfeitures. U.S. v. Smith, 966 F.2d 1045 (6th Cir. 1992).
7th Circuit holds that money government seized in lawful search of defendant’s home was subject to forfeiture. (195) Defendant plead guilty to conspiracy to distribute the illegal dug “ecstasy.” The government seized money in the lawful search of his home and forfeited the found money totalling $6,710. The money was found together with a large quantity of illegal drugs, a digital scale, and other evidence of drug trafficking. The government had made controlled purchases from him, with marked money to buy drugs from him and the informants had paid him this money, totalling $7,675. The 7th Circuit rejected the defendant’s argument that his restitution order to pay back the $7,675 should be offset by the forfeited amount of $6,710. Because the seized money was found in his home together with a large quantity of illegal drugs, and as such was expressly forfeitable and not his lawful property, it could not be the basis of a setoff. Limited remand on other grounds. U.S. v. Cook, 406 F.3d 485 (7th Cir. 2005).
7th Circuit upholds forfeiture of house paid for partly with drug money on facilitation theory. (195) The government sought forfeiture of a drug dealer’s house under 21 U.S.C. §881(a)(7) as property that facilitated his drug trafficking activities. Claimant asserted that the forfeiture was improper where the property “was not purchased entirely with proceeds from drug sales.” The Seventh Circuit found this fact was irrelevant because the government relied on a facilitation theory pursuant to §881(a)(7), rather than a proceeds theory pursuant to §881(a)(6). The forfeiture order was affirmed. U.S. v. One Parcel of Real Estate Located at 936 Northeast Glen Oak Avenue, 172 F.3d 54 (7th Cir. 1999) (table) (unpublished).
7th Circuit upholds forfeiture of entire bank account in money laundering case. (195) The government seized the contents of a bank account into which fraud victims were induced to transfer money. During forfeiture proceedings pursuant to 18 U.S.C. §981, claimant urged that, even if some of the funds in the account were forfeitable, the government could not take the entire contents of the account. The government did not proceed on a facilitation theory (i.e., the theory that all funds in the account were forfeitable regardless of source because the account was used to carry out a fraud), but rather argued that all fund in the account were forfeitable because they were the proceeds of criminal activity. The Seventh Circuit sustained forfeiture of the entire account. It emphasized that the amount of fraudulently obtained money deposited into the account exceeded its balance at the time of seizure. Moreover, claimant made no effort to show that any portion of the money on deposit came from an untainted source. U.S. v. United States Currency Deposited in Account No. 1115000763247 for Active Trade Company, 176 F.3d 941 (7th Cir. 1999).
7th Circuit says probable cause established by owners’ drug activity and discrepancy between legitimate income and value of assets. (195) The government brought a forfeiture action against certain real property worth $3.5 million owned by a family involved in drug trafficking. The Seventh Circuit held that probable cause for the forfeiture was established by the owners’ known drug activity and the great discrepancy between their legitimate income and the value of the assets. The government is not required to show a direct connection between the property and the illegal activity. Evidence of prior convictions for drug possession or trafficking is admissible in a probable cause determination. Once the government established probable cause, the burden shifted to the claimants to demonstrate that the property was not used in connection with drug activities. Claimant made no such showing. In fact, claimant failed to respond to the government’s statement in support of summary judgment. Therefore, she admitted that the properties were purchased with drug proceeds or were used to facilitate the drug trade. U.S. v. All Assets and Equipment of West Side Building Corp., 58 F.3d 1181 (7th Cir. 1995).
7th Circuit affirms that funds, rather than account in which funds are located, must be traced to fraudulent activity. (195) Defendants sold stereo speakers using fraudulent sales techniques, and put the proceeds from the fraud in several different accounts. The United States brought a forfeiture action under 18 U.S.C. §981 against the funds in these accounts. Claimants contended that they ended their fraudulent scheme in 1988, and the sums seized from the accounts in September 1989 could not be traced to their fraudulent scheme. The government contended that it did not matter whether the balances in the accounts could be traced to unlawful activity since the accounts were “involved in” the fraud during 1988. The 7th Circuit rejected the argument, holding that such tracing was necessary. “It makes no sense to confiscate whatever balance happens to be in a account bearing a particular number, just because proceeds of crime once passed through that account.” Only property used in or traceable to “specified unlawful activity” is forfeit. However, the money seized in this case was forfeitable. Claimants only admitted phasing out the use of one of their fraudulent sales techniques. Abandoning one deceitful device among a large repertory does not make the operation lawful. U.S. v. $448,342.85, 969 F.2d 474 (7th Cir. 1992).
Eighth Circuit holds that totality of these circumstances leads naturally to inference that claimant was involved in illegal drug activity and currency was substantially connected to it. (195) The defendant’s currency was seized from one of the claimants, Gonzolez, who was driving west in a rented Ford Taurus when a Nebraska State Patrol Trooper stopped him for exceeding the posted speed limit. Gonzolez presented a Nevada driver’s license and a rental contract for the car, but the rental contract was not in his name and did not list him as an additional driver. The trooper did not speak fluent Spanish, but testified that Gonzolez responded to his questions, which were mostly in English, in a combination of English and Spanish. Gonzolez said he had been in Chicago for three days and a person named “Luis” had rented the car for him, but the name “Luis” did not match the name on the rental agreement. Gonzolez also said he never had been arrested or placed on probation or parole. In a consent search, the trooper opened a cooler on the back seat and found a large plastic bag that contained seven bundles wrapped in rubber bands inside aluminum foil packaging that contained a total of $124,700 in currency. A police canine was alerted to the rear passenger side of the vehicle. At trial, the government argued that the currency was substantially connected to a drug transaction. The claimants, however, argued that the money had a legitimate source, a combination of borrowed money and personal cash savings. Gonzolez also testified that he hid the money in a cooler because he was afraid that he might be assaulted or have the money stolen if it was readily observable, and he was “scared” when the troopers began questioning him about whether he was carrying drugs or currency. He said that he lied about the money and about the names of other parties involved, because he believed that carrying large amounts of cash might be illegal, and he did not want to get his friends in trouble. The district court concluded that the government had not established, by a preponderance of the evidence, that there was a substantial connection between the money and a drug trafficking offense, noting that large sums of unexplained currency can be evidence of drug trafficking, and that in this case the money was bundled in an unusual manner; however, the claimants had given a plausible and consistent explanation for the money’s origin and intended use. With respect to the canine alert, the court agreed that the alert provided some, but only slight, evidence that the money was connected to drug trafficking. The court did not believe the evidence taken together with the other circumstances, including all the claimants’ lack of significant criminal history, established a substantial connection to drug activity. On de novo review, the court of appeals reversed, believing the evidence as a whole demonstrated by a preponderance of the evidence that there was a substantial connection between the currency and a drug trafficking offense because 1) possession of a large sum of cash is “strong evidence” of a connection to drug activity; 2) the currency was concealed in aluminum foil inside a cooler; 3) the canine alert supported the connection; 4) the route and circumstances of Gonzolez’s travel were highly suspicious, since Gonzolez had flown on a one-way ticket, and he gave a vague explanation, attributed to advice from an unidentified third person, about why he elected to return by car; 5) he was driving a rental car that was leased in the name of another person who was not present; and 6) when questioned by officers, he lied about having money in the car and about the names of his friends. The totality of these circumstances leads naturally to the inference that Gonzolez was involved in illegal drug activity, and that the currency was substantially connected to it. U.S. v. $124,700 in U.S. Currency, 58 F.3d 822 (8th Cir. 2006) (August 18, 2006).
8th Circuit says proceeds of RICO enterprise are the gross receipts of the illegal activity. (195) Defendants were convicted of bribery, mail fraud, and RICO violations in connection with a series of schemes to bribe Missouri state officials. The district court ordered forfeiture of the proceeds of the schemes received by one of the defendants in the form of fees for lobbying. The Eighth Circuit ruled that defendants were not entitled to offsets for the direct costs of their lobbying efforts. The court noted that several circuits have permitted deductions for the costs of performing an illegal activity, see, e.g., U.S. v. Masters, 924 F.2d 1362, 1369-70 (7th Cir. 1991), and U.S. v. Lizza Industries, Inc., 775 F.2d 492, 498 (2d Cir. 1985). The panel nonetheless ruled that “the better view is the one that defines proceeds as the gross receipts of the illegal activity.” U.S. v. Simmons, 154 F.3d 765 (8th Cir. 1998).
8th Circuit finds folded money was drug proceeds. (195) Government agents seized $2,000 in cash from a ski jacket found in the closet of a “safe house” used by drug conspirators. These facts, together with the money being “folded in a manner consistent with drug trafficking,” were sufficient to support a jury verdict that the funds were drug proceeds. U.S. v. Alaniz, 148 F.3d 929 (8th Cir. 1998).
8th Circuit deducts money returned to victim, but forfeits increased value of property bought with proceeds. (195) Defendant was convicted of money laundering under 18 U.S.C. §1957, mail fraud, and criminal forfeiture under 18 U.S.C. §982(a)(1) when he misappropriated the proceeds of a charity concert. The Eighth Circuit found that forfeiture under §982(a)(1) was proper despite defendant’s complaint that this was “fundamentally a mail fraud case.” The court also rejected defendant’s contention that he should receive credit for value he added to a mobile home purchased with laundered funds. On the other hand, the court agreed that defendant should receive credit for money he misappropriated but returned to the charity concert accounts. U.S. v. Hawkey, 148 F.3d 920 (8th Cir. 1998).
8th Circuit finds receipts of businesses were not all subject to RICO forfeiture. (195) In a RICO prosecution, the district judge entered pre-conviction orders appointing a monitor, and later a receiver, to manage insurance‑related companies owned by RICO defendants. The Eighth Circuit held that the government’s mere allegation that the companies were enterprises through which defendant conducted racketeering activities did not justify the restraint orders absent identification of the relationship between the companies and the specific assets which might be subject to forfeiture. RICO does not permit the government to seize control of the enterprise that defendants used to accomplish their racketeering, since only defendants’ interest in the enterprise is forfeitable. The entire gross receipts of defendants’ insurance businesses were not “proceeds” of racketeering subject to forfeiture. The insurers’ gross receipts would include funds other than racketeering proceeds, such as amounts needed to pay policyholder claims. U.S. v. Riley, 78 F.3d 367 (8th Cir. 1996).
8th Circuit agrees that cash found in trunk of car at defendant’s car dealership was drug proceeds. (195) Defendant sold crack from his auto sales business. The Eighth Circuit agreed that the government proved by a preponderance of the evidence that $30,577 seized from the trunk of a car at the dealership constituted or was derived from defendant’s drug trafficking. Defendant had been involved in drug trafficking in the past, the money was stores in a highly unusual location despite the fact that defendant had bank accounts for his business, and marked money from undercover drug deals was intermingled in the $30,577. U.S. v. Wojcik, 60 F.3d 431 (8th Cir. 1995).
8th Circuit finds sufficient relationship between money in safe deposit box and drug offense. (195) The government brought a forfeiture action against $87,060. About $30,000 had been seized from claimant’s residence, and the remaining $57,000 was seized from a safe deposit box rented by claimant. The 8th Circuit agreed that the government established probable cause to believe that the money was drug proceeds from claimant’s cocaine dealing. At the time of the seizure, claimant had been involved in a large-scale cocaine distribution conspiracy. He had made 10 visits to the safe deposit box number 954 in 1989 and 1990, and the bundles of currency in the safe deposit box were wrapped similarly to the bundles found in his house. The court also was justified in rejecting the innocent owner defense of claimant’s wife and her friend. Although they contended that the $57,000 was found in box number 2175, the conclusion that the money came from box number 954 was not clearly erroneous. In addition, the use of a safe deposit box rather than an interest-bearing account was questionable, particularly since the bundles of money in the box were wrapped similarly to the bundles found in claimant’s house. U.S. v. Eighty-Seven Thousand Sixty Dollars ($87,060.00), 23 F.3d 1352 (8th Cir. 1994).
8th Circuit holds defendants waived objection to all-or-nothing forfeiture by failing to object to jury instructions. (195) Defendants were convicted of bank fraud and RICO charges stemming from the collapse of the saving and loan association of which they were officers. Defendants argued that the district court should not have forfeited 100 percent of the salaries and bonuses that the jury found were proceeds of RICO activity. They contended on appeal that portions of the salaries and bonuses were earned through legal activity. The 8th Circuit found that defendants had waived this complaint by failing to object below to the jury instruction and verdict form. Moreover, the evidence supported complete forfeiture of the salaries and bonuses. U.S. v. Olson, 22 F.3d 783 (8th Cir. 1994).
8th Circuit refuses to open default forfeiture judgment where claimant failed to show meritorious defense. (195) Defendant challenged a default forfeiture judgment against his property, claiming his counsel had collaborated with the government by allowing the property to be forfeited. The 8th Circuit upheld the district court’s refusal to set aside the default, agreeing that even if claimant’s allegations were true, he had failed to show any basis upon which he could succeed if the default judgment was vacated. The government alleged that claimant purchased the property with a down payment of $18,000, using four cashier’s checks and four money orders from five different banks. Claimant extensively remodeled the property. Claimant’s business was merely a front, and his tax returns showed income woefully inadequate to support the remodeling. Claimant did not deny these allegations and failed to produce any evidence that the money to purchase and improve the property came from legal sources. U.S. v. Premises Known as 15145 50th Street South, 5 F.3d 1137 (8th Cir. 1993).
8th Circuit affirms probable cause to forfeit money observed in briefcase during an airport search. (195) In accordance with standard procedure, airport security officers asked claimant to open his briefcase for inspection. They observed a large amount of currency covered by papers and torn yellow pages from a phone book. The security officers notified DEA agents who contacted the claimant at the airport and obtained consent to search his briefcase. The claimant provided inconsistent explanations concerning the presence of the money, the purchase of the briefcase, and his arrest record. In addition, his one way plane ticket had been purchased with cash and contained a passenger name different from his. A police dog sniff test indicated that the briefcase had been near narcotics. The 8th Circuit held that this established probable cause to believe that the money was traceable to a drug transaction. U.S. v. Ninety-one Thousand, Nine Hundred Sixty Dollars ($91,960.00), 897 F.2d 1457 (8th Cir. 1990).
9th Circuit rules proof that owner was drug dealer with no legal income doesn’t make house forfeitable. (195) The government sought civil forfeiture of the residence of a drug trafficker. The district court suppressed on Fourth Amendment grounds most of the evidence tracing drug money to purchase of the house, but found probable cause for the forfeiture anyway. The Ninth Circuit examined the unsuppressed evidence and concluded that it proved claimant to be a “large-scale drug dealer who possessed large amounts of cash and other expensive assets, which he tried to conceal, and that he lacked a legitimate source of income.” However, this was not enough to establish the requisite nexus between the house and illegal drug transaction, and thus the government failed to show probable cause for the forfeiture. U.S. v. Real Property Known as 22249 Dolorosa Street, 167 F.3d 509 (9th Cir. 1999).
9th Circuit holds only $4300 directly traceable as drug buy money forfeitable from $43,000 cash hoard. (195) In an opinion remarkable on a number of points, the Ninth Circuit vacated the bulk of a criminal forfeiture against a convicted drug trafficker. Defendant was convicted by a jury of one count of conspiracy to distribute methamphetamine, three counts of distribution of methamphetamine (one of which was vacated on appeal), one count of possession with intent to distribute marijuana, and criminal forfeiture of $43,070 in cash found in a locker rented by defendant under a false name. Among the bills seized were $4300 in marked buy money from two of the methamphetamine transactions for which defendant was convicted. The locker also contained marijuana packaged for sale. A search of defendant’s house produced a written record of money owed for drug sales. The defendant testified and admitted that at least $10,000 of the money in the locker came from marijuana sales, but claimed the balance came from legitimate employment and sale of a mobile home for a relative. He was unable to produce documents supporting either the receipt of income or the sale of a mobile home. The court of appeals nonetheless found the government had failed to show an adequate nexus between any of the seized cash except the marked buy money and any offense of conviction, including the conspiracy. Implicit in the court’s ruling was a finding that defendant was not even jointly and severally responsible for forfeiting drug proceeds received by his co-conspirator. Judge Beezer filed a spirited dissent. U.S. v. Garcia-Guizar, 160 F.3d 511 (9th Cir. 1998).
9th Circuit finds check satisfying judgment against state for wrongful conversion seizable as traceable proceeds. (195) Fairbanks, Alaska police seized drugs and $44,850 in cash from claimant’s trailer home, and then turned the money over to the DEA for forfeiture proceedings. The money was successfully federally forfeited. However, claimant’s criminal charges in state court were dismissed on a finding of lack of probable cause for the search, and the state court also found that the police had unlawfully converted the money by surrendering it to federal officials without first going through state forfeiture proceedings. The City of Fairbanks issued claimant a check for $58,654.11 (the original sum seized plus interest) in satisfaction of the judgment on the conversion claim. The DEA seized the check. The Ninth Circuit found that the check was forfeitable as traceable proceeds of a narcotics trafficking offense. Moreover, there was nothing improper about the DEA’s subsequent decision to pay a portion of the check back to the city. U.S. v. Check No. 25128 in the Amount of $58,654.11, 122 F.3d 1263 (9th Cir. 1997).
9th Circuit rejects retroactivity for statute permitting forfeiture of bank account for laundered funds. (195) In September, 1992, the government seized $814,254.76 from an interbank account. That account had been used to launder money, but none of the seized cash was actually traceable to money laundering. A month later, in October, 1992, Congress enacted 18 U.S.C. §984, permitting the civil forfeiture of money in a bank account even when the money seized is not directly traceable to the laundered funds, so long as the account previously contained the funds involved in or traceable to the illegal activity. However, the Ninth Circuit held that the new statute was not retroactive, and therefore did not apply to the present seizure. Accordingly, the forfeiture of the funds in this case was reversed. U.S. v. $814,254.76, in U.S. Currency, 51 F.3d 207 (9th Cir. 1995).
9th Circuit finds probable cause for forfeiture based on large amount of currency and drugs nearby. (195) The 9th Circuit found that $29,959.00 in cash kept in the home is “strong evidence that the money was furnished or intended to be furnished for drugs.” Drugs and drug paraphernalia found in the yard and adjacent trailer “are also strong evidence of a drug operation.” When the police arrived, one person was found stuffing bags of cocaine down the trailer kitchen sink. An officer testified that it is common for narcotics dealers to keep the proceeds of sales separate from the transaction and drug storage location. The 9th Circuit found these factors sufficient to constitute probable cause to seize the currency. U.S. v. $29,959.00 U.S. Currency, 931 F.2d 549 (9th Cir. 1991).
9th Circuit holds that carrying a large sum of cash is “strong evidence” of drug dealing. (195) The 9th Circuit ruled that “[c]arrying a large sum of cash is ‘strong evidence’ of [drug dealing] . . . even without the presence of drugs or drug paraphernalia.” “So, too, is the positive canine alert for the presence of narcotics on the seized currency.” In addition, here the courier lied about the money, and his ticket was issued by a Miami travel agency that had issued tickets for some 20-30 other travelers from whom the officer had previously seized narcotics-related currency. Moreover, the courier’s “nervousness and his Miami destination, a ‘well-known center of illegal drug activity,’ were probative of probable cause in combination with the other circumstances.” Thus the court found probable cause to seize the $215,000 cash, even though it rejected as “not probative” a NADDIS report that the courier had been arrested nine years earlier on a marijuana charge which was later dismissed. U.S. v. $215,300 U.S. Currency, 882 F.2d 417 (9th Cir. 1989).
9th Circuit finds claimant failed to meet his burden to show that money was not related to narcotics trafficking. (195) To rebut the government’s showing of probable cause in a civil forfeiture proceeding, the claimant must “prove the money had an independent source and had not been used illegally.” Here the claimant testified and was cross-examined in a three-day bench trial. He testified he had accumulated the $216,000 in his office safe from transactions involving the sale of gold and had “loaned” it to the courier to purchase gold coins from a dealer in Los Angeles. He took no receipt or other evidence for the loan and he was not told by the courier who the Los Angeles seller was or where in the Los Angeles area he could be found. He conceded that cash transactions were contrary to his usual practice. He also “testified that he took no precautions to guard against illegal use” by the courier. Thus the court ruled that his “[f]ailure to exercise due care precludes reliance upon the innocent owner defense.” U.S. v. $215,300 U.S. Currency, 882 F.2d 417 (9th Cir. 1989).
9th Circuit finds claimant’s testimony that money came from innocent source not credible. (195) The claimant and family members testified that the $40,000 in his safe had come from his job, from a home improvement loan, and from his sons who asked to hold it for safekeeping, “yet no one provided written documentation or accounts to verify this.” The Ninth Circuit upheld the district court’s finding that this testimony was not credible, and that therefore the claimant failed to prove that the money was not connected with illegal drug transactions. U.S. v. Padilla, 889 F.2d 642 (9th Cir. 1989).
10th Circuit affirms probable cause based on hidden currency and drug paraphernalia. (195) The 10th Circuit affirmed the district court’s determination that there was probable cause to forfeit cash found in claimant’s home and several vehicles owned by claimant. The unusually large amount of hidden currency ($149,442) and presence of drug paraphernalia, including packaging supplies and drug notations reflecting large drug transactions, established a sufficient nexus between the property and claimant’s involvement in drug trafficking. Claimant did not establish that the money was from legitimate sources. The vehicles were also properly subject to forfeiture. One contained a loaded pistol and a notebook containing drug notations, which indicated that it had been used to facilitate drug trafficking. Moreover, a sufficient nexus was established between the purchase of the vehicles with cash and claimant’s involvement in illegal drug transactions. Although the government did not tie the vehicles to a specific drug transaction, both were purchased with cash during the years when the district court found that claimants had failed to demonstrate legitimate alternate sources of income large enough to account for their cash expenditures. U.S. v. One Hundred Forty-Nine Thousand Four Hundred Forty-Two and 43/100 Dollars ($149,442.43), 965 F.2d 868 (10th Cir. 1992).
10th Circuit holds government had probable cause that currency constituted drug “proceeds.” (195) The government forfeited $189,825 that was hidden in the gas tank of a pickup truck. The 10th Circuit held that the government had probable cause to believe that the money hidden in the gas tank constituted drug proceeds. Evidence included the fact that the money was hidden in the gas tank of the pickup truck; gas tanks are often used to conceal drug proceeds; the gas and tank help mask the odor of drugs; several characteristics of the drug courier profile were present; the truck was being driven by two Mexican nationals who did not have proper visas and who did not own the truck; the truck was traveling on a route known by law enforcement agents as a drug courier route; a large amount of currency was involved; a drug-sniffing dog alerted to the presence of drugs on exterior and interior of the truck; and the unique packaging of the currency that was triple-wrapped in cellophane. United States v. $189,825.00 in U.S. Currency, 216 F.3d 1089 (10th Cir. 2000)
11th Circuit rejects forfeiture of property obtained before charged acts of racketeering. (195) Defendant was convicted of RICO and Travel Act violations. The Eleventh Circuit rejected the forfeiture of defendant’s interest in a casino, because the jury found that the first racketeering act he engaged in occurred after he had already acquired his interest in the property. Property forfeitable in a RICO proceeding is limited to that which the defendant obtains directly or indirectly as a result of the racketeering activity. Property acquired before a defendant commits an act of racketeering cannot be said to have been derived from it. U.S. v. Kramer, 73 F.3d 1067 (11th Cir. 1996).
11th Circuit says large amount of currency, by itself, was not probable cause for forfeiture. (195) DEA agents seized $121,000 in cash from claimant as he was attempting to board an airplane. The district court held that a large amount of seized currency alone was sufficient to establish probable cause for the forfeiture of the money. The 11th Circuit rejected this conclusion, holding that a large amount of currency, by itself, is insufficient to establish probable cause for forfeiture under 21 U.S.C. §881(a)(6). However, summary judgment in favor of the government was affirmed, since under the totality of the circumstances, probable cause existed for the forfeiture. The manner in which defendant purchased his airline ticket and the nature of his travel itinerary made it unlikely that he was travelling on either business or vacation. When questioned by DEA agents, defendant appeared quite nervous. Finally, defendant had a history of narcotics arrests and convictions. U.S. v. $121,100.00 in United States Currency, 999 F.2d 1503 (11th Cir. 1993).
11th Circuit, en banc, reverses summary judgment in favor of claimant in forfeiture action against a bulldozer. (195) In an en banc decision the 11th Circuit reversed a summary judgment in favor of claimant in a forfeiture action against a bulldozer. The government showed that a convicted drug dealer with no legal means of support purchased the bulldozer with $65,000 in cash. The drug dealer used the bulldozer for his own purposes, kept it on his property, and led others to believe that it was his. Claimant rebutted this showing with testimony that a dealer had purchased the bulldozer on claimant’s behalf for claimant’s logging business, that the bulldozer was depreciated by the logging business in its state and federal income tax returns, and that claimant permitted the dealer to use the bulldozer for his own purposes because the dealer operated the bulldozer in claimant’s logging business without compensation. However, there were internal inconsistencies with claimant’s story and a jury could choose to disbelieve the explanation. The uncontested facts reasonably suggested that the dealer bought the bulldozer with the proceeds of drug transactions. Whether claimant’s explanation should be believed was a question for the jury, not the district court. Several judges dissented, finding the government failed to produce sufficient evidence. U.S. v. Four Parcels of Real Property in Greene and Tuscaloosa Counties, 941 F.2d 1428 (11th Cir. 1991) (en banc).
11th Circuit affirms refusal to grant summary judgment to forfeit cashier’s checks drawn on a Swiss bank account by drug fugitive. (195) The government sought to forfeit $200,000 in cashier’s checks drawn on a Swiss bank account by a fugitive convicted of narcotics offenses. The fugitive’s sisters had attempted to deposit the checks in a Panamanian bank but were refused and subsequently expelled from that country. The checks were seized when the sisters attempted to pass through customs in Miami without declaring the checks. The 11th Circuit affirmed the district court’s order finding that the government had failed to show sufficient probable cause to justify granting a motion for summary judgment. The government’s affidavit failed to show that a “substantial connection exists between the 20 cashiers checks at issue and the exchange of a controlled substance.” U.S. v. Twenty (20) Cashier’s Checks, 897 F.2d 1567 (11th Cir. 1990).
D.C. Circuit upholds forfeiture of portion of proceeds from sale of property partially purchased with RICO proceeds. (195) Defendant contended it was improper to require him to forfeit part of the proceeds from his sale of a property, when the property’s only connection to defendant’s RICO violations was that defendant made a down payment on the property with two $5,000 checks drawn on an escrow account in which, from time to time, he deposited illegal proceeds from his racketeering activities. Defendant claimed that the $10,000 could not have been the proceeds of his racketeering activity because at the time the checks were drawn, the escrow account had a negative balance. The D.C. Circuit rejected this argument, noting that defendant deposited into the account illicit RICO funds six days after the first check was written, and before the check cleared the bank. The court also upheld the forfeiture of only a portion of the proceeds derived from the sale of the property. Since defendant used RICO proceeds to pay for only part of the property, it was not irrational for the jury to conclude that only part of the funds derived from the sale of that property could be traced to the RICO money. U.S. v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990).
Alabama District Court finds no probable cause that money was proceeds. (195) In June 1996, the government filed an in rem forfeiture action against money in claimant’s bank account, based on allegations that he was trafficking in drugs in 1995-96. Claimant established that the account had been opened in 1989 by his common law wife who used the account in her business of selling cars. Moreover, although claimant’s name was also on the account, his wife died in 1994 and no further activity on the account occurred after her death. The district court permitted the government to rely on claimant’s 1991 conviction for possession of drugs to show his involvement in drugs before 1994. See U.S. v. Four Parcels of Real Property in Greene and Tuscaloosa Counties in the State of Alabama, 941 F.2d 1428, 1439 n.24 (11th Cir. 1991) (holding that the government may rely on facts outside its verified complaint in determining probable cause). Nonetheless, the court ruled that the 1991 possession conviction did not establish probable cause that claimant was trafficking in drugs. Finally, the court found no probable cause to believe the contents of the bank account were the proceeds of, or had been used to facilitate, illegal narcotics activity. Claimant’s motion for summary judgment was granted. U.S. v. $10,360 in United States Currency, No. CIV.A. 96-A935-E. (M.D. Ala. April 17, 1997) (not reported in F.Supp.).
Florida District Court finds no probable cause for forfeiture of aircraft. (195) The government seized and sought forfeiture of a private airplane as proceeds of narcotics trafficking. The only evidence adduced was: (1) The plane had been seized by the Colombian government for involvement in drug trafficking some years before, but there were no records of how it came to be released; (2) The plane was owned by a corporation controlled by one of the passengers, a man suspected of drug trafficking; (3) The pilot worked in the past for a known drug trafficker. These facts did not establish probable cause. U.S. v. One (1) 1980 Cessna 441 Conquest II Aircraft, 989 F.Supp. 1465, 11 Fla. Law Weekly Fed. D. 484 (S.D. Fla. 1997).
Illinois District Court finds no need to show source of seized funds if tainted deposits exceed account balance at time of seizure. (195) The government sought forfeiture of roughly $300,000 from a bank account that had been used to launder sums larger than that figure. Relying on U.S. v. $448,342.85, 969 F.2d 474, 476-77 (7th Cir. 1992), claimant contended that the government was entitled only to funds used in or directly traceable to “specified unlawful activity,” and that it failed to show the entire $300,000 was tainted. The district court noted that 18 U.S.C. §984 was enacted in 1992 to alleviate the tracing difficulties highlighted in $448,342.85. Section 984(b)(1)(B) states that in cases involving cash, bank accounts, and the like, “it shall not be a defense that the property involved in the offense has been removed and replaced by identical property.” Thus, where the government has shown that the amount of tainted money passing through an account exceeds the balance on hand on the date of forfeiture, specific tracing will be unnecessary and forfeiture will be ordered. U.S. v. United States Currency Deposited in Account No. 1115000763247, 1998 WL 299429 (N.D. Ill. 1998) (not reported in F.Supp.).
Illinois District Court rules property forfeitable only to extent tainted funds “benefited” the property. (195) Defendant was charged with Medicare fraud and money laundering, and the indictment sought criminal forfeiture of his house and cars. Defendant argued that these assets should be forfeitable only to the extent that criminally tainted funds were used to purchase or maintain them. The district court agreed. Relying on U.S. v. Federal Security, 1998 WL 324842 (N.D. Ill. June 9, 1998), the court rejected the government’s contention that property traceable to property involved in money laundering is forfeitable in its entirety. Rather, such property should be forfeitable only to the extent that the defendant “used tainted funds to benefit those assets.” U.S. v. Pergler, 1998 WL 887113 (N.D. Ill. 1998) (not reported in F.Supp.).
Illinois district court finds probable cause to believe money is subject to forfeiture based on information obtained by the government after initial seizure. (195) The government file a forfeiture action for $122,500 seized from claimant upon his arrival at O’Hare International Airport on a flight from Yugoslavia. The district court dismissed claimant’s motion to dismiss for lack of probable cause. The court found that there was a reasonable basis to believe that the money was furnished, or was intended to be furnished, to facilitate narcotics trafficking because the claimant was carrying a large amount of cash, he did not have income that corresponded to such amount, and he made false statements to customs agents. Additionally, evidence uncovered after the money seizure suggested that claimant worked as a drug courier and was involved in drug trafficking before and after the time of the seizure. The court further posited that probable cause for forfeiture may be determined on the basis of information possessed by the government at the time of the forfeiture proceeding. United States v. Funds in the Amount of $122,500.00, 2002 WL 984411, (N.D. Ill 2000) (not reported in F.3d)
Kansas District Court upholds seizing items outside scope of warrant as possible proceeds. (195) Wichita, Kansas police obtained a warrant to search defendant’s residence for drugs, drug paraphernalia, and other evidence of drug trafficking. On the advice of DEA agents who accompanied them, the officers also seized various valuable items outside the scope of the warrant—such as big-screen TV’s, a riding lawn mower, a four-wheel Suzuki Quad Runner, and camera equipment—as proceeds of drug activity. Before his criminal trial, defendant moved to suppress these items. The district court ruled that, based on the information in the affidavit and otherwise available to the searching officers, there was probable cause to believe that the items seized were the forfeitable proceeds of defendant’s drug business. The court focused on four factors: direct evidence that defendant was dealing drugs, the fact that defendant had been unemployed for years, defendant’s purchase of various expensive things (including a house and cars), and the value of the objects seized. The motion to suppress was denied. U.S. v. Washington, 1997 WL 198046 (D. Kansas 1997) (not reported in F.Supp.).
Louisiana District Court dismisses forfeiture action for lack of probable cause. (195) The district court granted summary judgment to the claimant in this civil forfeiture action against cash seized from a domestic airline passenger. The court found the following facts insufficient to show probable cause to believe the money was narcotics proceeds: (1) claimant purchased with cash a one-way ticket from New Orleans to Houston, Texas, “a known source city for drugs”; (2) claimant appeared nervous while purchasing his ticket and while talking with officers; (3) claimant gave an improbable explanation for his trip involving visiting a niece whose last name he did not know; (4) claimant asserted he was not carrying any large sums of cash; (5) claimant was carrying $14,876 in cash in his pocket and in his shoes; (6) claimant’s story about the origin of the money was “confusing and somewhat improbable” and he lied about his last trip to Houston; (7) a drug dog alerted to the money; and (8) claimant’s cellphone had in its memory the number of a man recently arrested for trafficking in 11 kilos of cocaine. The court concluded that all this amounted to little more than “mere suspicion.” U.S. v. $14,876.00 in U.S. Currency, 1998 WL 556266 (E.D. La. 1998) (not reported in F.Supp.).
Massachusetts district court grants summary judgment for claimant because only evidence connecting cash to a drug transaction was dog alert, which is, at best, of limited value. (180, 195) While sitting at a red light, officers observed an automobile make an illegal left turn, activated the siren and attempted to stop the vehicle, which initially kept moving but eventually pulled over after several verbal commands from the cruiser. The officers approached the vehicle and identified the claimant as the driver. When they relayed his information to dispatch, they learned that he had a suspended driver’s license and an outstanding warrant for his arrest for operating after suspension. As officers conducted an inventory search, the claimant started to “yell” to his passenger in Spanish. Until that point, Martinez had been speaking fluent English with both officers. The tow truck officer, who understood Spanish, informed the officers that the claimant had said “get the bag, get the bag.” The passenger attempted to remove a backpack from the trunk of the vehicle. Officers opened the bag and discovered the subject cash “strewn” inside. Because of the large amount of cash, his nervous behavior and his inconsistent answers about his intended use for the money, the officers conducted a canine drug sniff, which was positive. The government filed a complaint for forfeiture against currency, and the claimant moved for summary judgment and/or to dismiss the forfeiture complaint. The government filed an opposition to that motion and a motion for discovery pursuant to Fed.R.Civ.P. 56(f). The Court allowed the government’s motion for discovery, denied the claimant’s motion for summary judgment without prejudice to its being renewed upon completion of discovery. After the expiration of the discovery deadline, claimant’s counsel informed the deputy clerk that the government had not pursued any discovery and that he intended to renew his motion for summary judgment and/or to dismiss the complaint by relying on his previously filed papers. As an initial matter, the court noted that it is not illegal in the United States to possess cash, and that the claimant has not been charged with any drug-related offense arising out of the arrest. It then found that post-CAFRA, numerous courts have interpreted Admiralty Rule E(2)(a) to require the government to establish “reasonable belief” that the property is subject to forfeiture, and thus the question is whether the facts alleged by the government are sufficient to demonstrate a reasonable belief that the property is subject to forfeiture and whether the claimant can frame a responsive pleading without moving for a more definite statement. The defendant cited numerous cases in which the evidentiary value of an alert by a drug-sniffing dog was called into doubt. In opposition, the government contended the cases cited by the claimant were outdated and that recently courts have accepted more accurate scientific testimony establishing the reliability of a positive dog alert as evidence that bills have been recently contaminated with illegal drugs. However, the only evidence connecting the cash to a drug transaction was the barking of a dog which is, at best, of limited value. The government made no allegations connecting the claimant with drug trafficking, nor did it suggest that the claimant was operating a vehicle in a high-crime area or that he has any known connection to drug dealers. Apart from the dog alert, no other evidence indicative of drug possession, such as drug paraphernalia or a firearm, was found in his car. Thus, the claimant could not reasonably frame a responsive pleading or a defense where the government alleges no connection with the drug trade other than a positive drug alert. Moreover, the actions of the claimant did not establish reasonable suspicion that the money was related to a drug transaction. It was not unreasonable for him to want to remove the cash from his car before watching it be towed away, and that he appeared “nervous” and told inconsistent stories regarding his intended use of the money which similarly failed to create reasonable suspicion that he had bought or sold drugs, because any rational person might be nervous when placed under arrest. In addition, the fact that he alternately told police the money was intended for a new car, or for a down payment on a house, or for deposit in a bank is not indicative of criminal activity. Notably, he made consistent statements with respect to the source of the money, telling the officers repeatedly that it resulted from an old tax return. Also, since the cash was discovered “strewn” about inside a backpack, the manner in which the claimant was found to transport cash was inconsistent with its use in the drug trade. Finally, unlike other cases in which the dog was presented with several bags of money and alerted on the suspected currency from among that group, in this case the dog had no options, albeit he discovered the bag inside a desk drawer in a large room, which undermined the reliability of the drug alert as the government’s sole evidence of illegal narcotic activity. While the complaint may not be dismissed for lack of evidence at the time of filing, and the government may gather additional evidence after filing for use at trial, the government failed to complete discovery, which it requested pursuant to Fed.R.Civ.P. 56(f), within the time frame prescribed by this Court and therefore waived its opportunity to gather additional evidence from or against the defendant. Moreover, the government admitted that it already disposed of a key piece of evidence, i.e., by exchanging the actual cash seized during the stop for a bank check. Rather than retain the cash in an evidence locker for subsequent testing or for use as evidence at trial, which would have been the prudent procedural course of action in a criminal case, the police conduct suggested a lack of confidence in establishing reasonable suspicion.Accordingly, the court dismissed the case and ordered the currency returned to the claimant. U.S. v. $12,840 in U.S. Currency, 2007 WL 2800811 (D. Mass. 2007) (September 21, 2007).
Texas District Court divides forfeited property by percentage of tainted funds used to buy it. (195) Defendants were convicted of fraud and money laundering. The government sought forfeiture of real property purchased in part with fraudulently obtained and laundered money. The district court held that the government was not entitled to the entire property. Rather, because only 52.6% of the money used to purchase the property was tainted, the government was entitled to only 52.6% of the value of the property at the time of forfeiture. The court also awarded the government 52.6% of the appreciation on the property since the time of its purchase by defendants. In plain numbers, defendants purchased the property for $965,000, $507,491.11 of which was tainted. At the time of forfeiture, the property was valued at $1.5 million. Therefore, the government was entitled to forfeiture of 52.6% of $1.5 million, or $789,000. U.S. v. Loe, 49 F.Supp.2d 514 (E.D. Tex. 1999).
Tennessee District Court finds government complaint sufficient under Admiralty Rule E(2)(a). (195) The government sought civil forfeiture of sixteen pieces of real property alleged to have been used as sites for marijuana grow operations or to have been purchased wholly or in part with drug proceeds. Claimants moved for summary judgment on the ground that the complaint was insufficiently specific to meet the heightened standard of particularity of Supplemental Admiralty Rule E(2)(a). The rule requires that the claimant “be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading.” Although many of the subject properties were acquired before or contemporaneously with the marijuana grow operations that formed the basis of the forfeiture and thus could not have been initially purchased with drug money, the complaint alleged that liens placed on the properties after their purchase had been paid with drug money. The court found allegations to this effect in the complaint sufficient to require denial of the summary judgment motion. U.S. v. One Parcel of Property Located at 2556 Yale Avenue, 20 F.Supp.2d 1212 (W.D. Tenn. 1998).
Wyoming District Court finds probable cause to forfeit grazing land as drug proceeds. (195) A South Florida drug smuggler active in 1985-86 bought grazing land in Wyoming in 1987, changed his name, and disappeared. When his true identity was discovered in 1996 and he was prosecuted on a 1989 narcotics indictment, the government also sought civil forfeiture of the Wyoming ranch. The district court found probable cause to believe the property was purchased with drug proceeds based on the following facts: (1) Claimant received $1.3 million for drug smuggling in 1986; (2) He purchased the Wyoming property for an unknown sum of cash in 1987; (3) He paid all his property taxes in cash; (4) He changed his name and engaged in other activities designed to conceal his identity and the source of his income; (5) He filed no income tax returns for 20 years and had no sources of legitimate income to account for his large cash expenditures. Because claimant offered no evidence to rebut the government’s showing of probable cause, the court granted summary judgment for the government. U.S. v. 657 Acres of Land … in Park County, Wyoming, 978 F.Supp. 799 (D. Wyoming 1997).