Appendix — Confecciones Zuny Ltda. v. United States
Supreme Court brief1994
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ee Supreme Court, U.S.
oe a ae Be
No
IN THE 3 1 0 5 4 DEC 2 2 1993
SUPREME COURT OF THE UNITED STATES
(fc ULEN
OCTOBER TERM, 1993
CONFECCIONES ZUNY LTDA., MANFACTURAS DE MODAS
LTDA., INCOLCO LTDA., VALERY FASHIONS LTDA.., -
CREACIONES KAREN LTDA., TOTE EXPORT
MANUFACTURAS LTDA., and CREACCIONES
IVONNE LTDA.,
Petitioners,
%
UNITED STATES OF AMERICA,
Respondent.
Petition for Writ of Certiorari
to the United States Court of Appeals
for the Second Circuit
APPENDIX TO PETITION FOR
WRIT OF CERTIORARI
Montgomery Blair Sibley
- Chartered Attorney &
Counselor at Law
5855 S.W. 131 Terrace
Miami, Florida 33156
(305) 662-5874
Counsel for Petitioners
N,N
LANTAGNE DUPLICATING SERVICES
801 East Main Street Suite 100 Richmond. Virgiminia 23219 (800) 84740477
A-i
Contents of Appendix Page
Memorandum and Order of the United States District
Court, Eastern District of New York entered on August 5,
We Sev itenenunsGcncurevinddes ccs A-1
Final Judgment and Order of the United States District
Court, Eastern District of New York entered on August 5,
WE saNksa reese vracenetencoe cero ede A-68
Opinion of the United States Court of Appeals for the
Second Circuit, United States vs. Johnny Daccarett et al.
Ce: Pat ere See ets ia ee A-75
Opinion of the United States Court of Appeals for the
Second Circuit entered October 6, 1993 denying petition for
MEL veyceduvovees oh eucueceerniec lo. A-167
Constitutional and Statutory Provisions ..... . A-171
Fourth Amendment .................. A-171
Fifth Amendment .................... A-17]
EE Co A-17]
18 U.S.C. §981(ay(1) 2.2.2.2... .... A-17]
1S UBC. BBM)... ww ccc ccc cn. A-172
EF ol. es A-i73
BD OPA GEIS voc cc ccc ccccrcccce, A-174
BF Wits DOOD ovo oc ivccvccccscecccee. A-174
21.U.S.C. §881(a) ....... oe. A-175
21 U.S.C. § 881(d) .. 2... A-175
A-]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_x
UNITED STATES OF AMERICA
MEMORANDUM
AND
ORDER
-against CV-902510
ALL FUNDS ON DEPOSIT IN ANY
ACCOUNTS MAINTAINED AT MERRILL
LYNCH, PIERCE,FENNER & SMITH,
ET AL.,
Defendants.
For the United States:
Andrew Maloney, United States Attorney
One Pierrepont Plaza
Brooklyn, NY 1120]
By Jennifer Boal
Gary Brown
Arthur Hui
For the Claimants:
Isidoro Rodriguez, Esq.
Calle 84 No. 56-5]
A-2
Piso 2, Office 4
Barranquilla, COLOMBIA
Attorney for ABUCHAIBE HNOS
COMERCIAL ESTRELLA LTDA
CONFECCIONES Y TEJIDOS
NACIONALES LTDA
CREACIONES VIVIANA LTDA
INDUSTRIAS MARATHON LTDA
MANUFACTURAS INTERNACIONALES
LTDA
MANUFACTURAS J.D. LTDA
MANUFACTURERA DEL ATLANTICO
LTDA
ORGANIZACION J.D. LTDA
Blair Sibley, Esq
Davis, Markel & Edwards
66 W. Flagler St
Mianu, FL 3330
Attorney fo CONFECCIONES' ELIZABETH
LTDA
CONFECCIONES ZUNY LTDA
CONFECCIONES IVONNE LTDA |
CONFECCIONES KAREN LTDA
INCOLCO LTDA
MANUFACTURAS DE MODAS
LTDA
TOTE EXPORT MANUFACTURAS
LTDA
VALERY FASHIONS LTDA
iaareeneinmeenemnnel
ee
A-3
Michael Abbell, Esq.
Ristau & Abbell
4801 Massachusetts Ave. NW
Washington, DC 20016
Attorney for SIRACUSA TRADING CO.
HEIRS OF HERIBERTO CASTRO
MESA
[. FACTS
[I LAW
lil. APPLICATION OF LAW TO FACTS
A. MOTION FOR JUDGMENT
NOTWITHSTANDING THE VERDICT
INDUSTRIAS MARATHON LTDA
OTHER FORFEITED CLAIMS
MANUFACTURAS J.D. LTDA -- $98.99]
ORGANIZACION J.D. LTDA -- $98,990
AND $98,800
CONFECCIONES ELIZABETH LTDA
- $40,000
B. MOTION FOR A NEW TRIAL
l. SHIFTING BURDEN OF
PROOF
SEPARATE TRIALS
3. OMNIBUS CRIME CONTROL
AND SAFE STREETS ACT
Ww I =
nN
aaa i
A-4
NEW YORK BANKS
5 UNITED STATES ATTORNEYS
6 EXPERT TESTIMONY
3 BEST EVIDENCE RULE
© MOTION TO RELEASE RES
FUGITIVE STATUS
2 "DISENTITLEMENT"
DOCTRINE
D MOTION TO STAY JUDGMENT
AND WAIVE SUPERSEDEAS BOND
IV. CONCLUSION
etait th tet eee eee ea a a
WEINSTEIN, J
This case reveals the sophisticated financial
Operations of an international criminal syndicate. It
involves more than ten million dollars in wire transfers
and deposited funds seized by the government as the
traceable proceeds of illegal money- laundering and
narcotics transactions. The moneys were alleged by the
government to be subject to forfeiture under 2] U.S.C
$881 et seg (1988 & Supp. IT] 1991), and 18 U.S.C. § 98] ef
A-5
seq. (1988 & Supp. III 1991). Claimants had the burden at
trial of proving either that each amount was not traceable
to drug sales or that the claimants were unaware of the
taint. After a two-month trial. the jury found that
eighteen of the twenty-two amounts seized were
lorfeitable. For three amounts claimed by two claimants
the jury determined that the funds were not the traceable
proceeds of illegal money-laundering and narcotics
transactions, and for one amount the jury found that the
claimant was an innocent owner.
Claimants who received an adverse Jury decision
move for judgment notwithstanding the verdict or for a
new trial; those motions are denied. Their motions to stay
execution of the judgment during the appeal without
posting a supersedeas bond are granted. Claimants
A-6
supported by the jury verdict move to release the res; that
motion is granted. The government moves to stay
payment of proceeds to two claimants on the ground that
they are represented by a fugitive; that motion -- perhaps
the most interesting in the case -- is denied.
i FACTS
Most of the funds seized and forfeited are the
proceeds of a well-organized multinational organization
based in the city of Cali, Colombia and led by a fugitive
named Jose Santa Cruz Londono. Londono and others
conducted extensive narcotics trafficking and money-
laundering activities involving hundreds of millions of
dollars and thousands of kilograms of cocaine smuggled
into the United States
The Londono organization utilized many
rr
A-7
sophisticated strategies to launder narcotics proceeds.
Electronic funds transfers from companies nominally in
the clothing manufacturing or import-export business
moved currency internaticnally; cars filled with cocaine
were driven from Florida to New York, where the drugs
were exchanged for cash and driven back to Florida (with
the money at times smelling so strongly of drugs and drug-
processing ingredients that it had to be literally washed
before it could be counted); shell corporations in Panama
and Colombia electronically transferred money to Europe
and elsewhere; huge amounts of cash were flown by plane
to Panama, unloaded, and deposited in banks accustomed
to such practices; drug dollars were exchanged on the
black market in Colombia for Cclombian pesos;
shipments of manufactured goods from Colombia to
heel
A-8
Panama were "lost" to cover up dollar transfers; "loans"
were made and paid the same day; and many other
procedures were used to disguise the true source and
nature of the funds
Extensive corporate and banking records from all
over the world were the primary basis for the
government's case. Claimants used corporate records,
letters rogatory, testimony of those with knowledge of
claimants’ activities, and still and video pictures
purporting to show the operations of their manufacturing
plants in Colombia
The Chief of the Drug Enforcement Admunistration
Financial Intelligence Group, Chery] Holmes, testified at
trial after reviewing the voluminous bank and corporate
records seized. She traced the links between numerous
a
A-9
Panamanian shell corporations, which sent and received
electronic funds transfers, and the Londono enterprise.
Certified Public Accountant Aram Kostoglian, another
government witness, testified that the cash receipts,
corporate records, and bank statements of the claimant
corporations were inconsistent with the types of records
held by legitimate companies in Colombia and elsewhere.
Several former Londono associates who had pled guilty
also testified at trial to the illegal nature of the various
enterprises utilized by claimants; one, who dealt in gold as
a cover-up, described the counting and re-packaging of
huge stacks of United States currency.
[In connection with the money-laundering scheme,
substantial sums of money were electronically transferred
into and out of bank accounts in many countnes including
A-10
the United States. see generally Manufacturas
International Lida vy. Manufacturers Hanover Trust Bank
etal (Consolidated Bank Cases), __F.Supp. _,1992WL
96212 (E.D.N.Y. 1992) (describing the wire transfers).
Officials of several European countries began cooperating
in 1989 investigating the Suspected drug-money-laundering
activities of Jose Santa CruzLondono. The inquiry began
in Luxembourg and culminated in the seizure of funds in
New York and abroad during the summer of 1990.
In September 1989, using a wiretap the
Luxembourg Surété Publique intercepted a telephone call
between Londono in Colombia and Jose Franklin Jurado-
Rodriguez, a Londono associate, in Luxembourg. Jurado
reported to Londono that he had successfully opened bank |
accounts using the name of Londono’s father-in-law, and
ne
A-11
that he planned to set up several shell companies to assist
in the money-laundering enterprises. The Surété learned
. through wiretaps and faxtaps that another Londono
associate, Edgar Alberto Garcia-Montilla, was opening
bank accounts throughout Europe in the names of
Londono’s parents-in-law, Heriberto Castro-Mesa and
Esperanza Rodriguez de Castro.
[In June 1990, Jurado, Garcia, anda third associate
Ricardo Mahecha-Bustos, were observed by European law
enforcement officers during a ten-day period traveling and
depositing large sums of money in accounts in Italy,
Luxembourg, Belgium, Denmark, Sweden, Germany, and
the Netherlands. They were arrested when they returned
to Luxembourg on money-laundering charges after a
lengthy trial.
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Heavy wire transfer activity followed the three
arrests. Using memoranda and bank records seized at the
time of the arrests, officials from several countries were
able to identify bank accounts around the world connected
to the complex drug money-laundering scheme. In July
and August 1990 approximately thirty million dollars was
seized in Europe and sixteen million dollars was seized in
Panama. In the United States, several American banks
having correspondent banking relationships with
Panamanian and Colombian banks were instructed by the
United States Attorney to seize certain funds on deposit
and wire transfers. The seized funds, totaling over ten
million dollars, were the subject of this All Funds action.
Pursuant to a succession of amended complaints
and supplemental warrants the banks were ordered by the
a
A-13
United States Attorney to attach the identified accounts
and wire transfers and pay the money into court pending
the outcome of a plenary trial. Ina separate action by
claimants against the banks which seized the f unds,
summary judgment was granted for the defendant banks.
F. Supp. __, 1992 WL 96212 (E.D.N.Y. 1992). Another
related action, by claimants against the United States
Attorneys who ordered the banks to seize the f unds, was
dismissed for failure to state a claim. Abuchaibe Hnos. y.
Maliz et al, CV 92-528 (oral decision).
Testimony at trial revealed an officially sanctioned
parallel unofficial street market in dollars in Colombia.
There was testimony that it is common knowledge in the
es
A-14
streets and board rooms of Colombia that the source of
the millions of American dollars in circulation in this
"black" market is largely the drug trade in New York and
other American cities.
II. LAW
As the "drug was" has escalated, the number of
forfeiture cases in the United States has burgeoned.
Taking away the profits of drug crimes through forfeiture
is a powerful weapon to cripple drug-trading enterprises.
Unfairly wielded it can place commercial enterprises at a
terrible disadvantage. It skirts the edge of due process.
Currency, 461 U.S. 555, 565-66 (1983) (balancing test set
Out in speedy trial context in Barker v. Wingo. 407 U.S.
514, 530 (1972), applies to determine reasonableness of
a
A-15
delay in forfeiture proceedings). Even when a claimant is
successful in fending off ultimate forfeiture, the loss of use
of the seized funds for months or years while the case
drags on can cripple a business. See id. at 565 ("Being
deprived of this substantial sum of money for a year and
a half is undoubtedly a significant burden."). The
substantive law, procedures, and allocation of burdens of
proof in forfeiture cases differ markedly from other civil
proceedings, and give the United States prosecutor a
substantial edge. See generally Edward M. Genson &
Mark W. Martin, A Guide to Handling Federal Narcotics
Forfeiture Cases, 79 Ill. BJ. 180 (1991) (discussing
forfeiture procedures).
The government brought these proceedings under
21 U.S.C. §881(a)(6), which provides for the forfeiture of
A-16
[a}ll moneys, negotiable instruments, securities, or
other things of value furnished or intended to be
furnished by any person in exchange for a
controlled substance . . . [and] all proceeds
traceable to such and exchange . . .
The procedures applied in civil forfeiture proceedings are
those "law[s] relating to the seizure, summary and judicial
forfeiture, and condemnation of property for violation of
the customs law." 2] U.S.C. § 881(d); United States y
$2.500 in United States Currency, 689 F.2d 10, 12(2d Cir
1982), cert. denied sub nom Aponte v. United States, 465
U.S. 1099 (1984).
Burdens of proof are allocated by 19 U.S.C. $1615.
Under that section, the burden of proof is on the claimant,
"[p]rovided that probable cause shall be first shown forthe
institution of such suit or action, to be judged .. . by the
court.” To begin forfeiture proceedings the government
ee
A-17
must first demonstrate that there was probable cause to
institute the action. It must demonstrate that there are
"reasonable grounds" to believe that the property is subject
to forfeiture. United States v. Banco Cafetero Panama
197 F.2d 1154, 1160 (2d Cir. 1986). "These grounds must
rise above the level of mere suspicion but need not amount
tO... ‘prima facie proof." Id.
The reasonable ground standard is less stringent
than the preponderance of the evidence standard. United
States v. 303 W 116th Street, NY. N.Y., 901 F.2d 288,
291 (2d Cir 1990). The government need not link the
funds to a particular narcotics transaction, but rather must
"connect the property with Narcotics activity ...." Banco
Cafetero, 797 F.2d at 1160. In Satisfying its burden, the
government may demonstrate probable cause that the
A-18
property itself, apart from the actions of the owner, is
connected to narcotics activity. See id: see also United
States v. One 1978 Chrysler LeBaron, 531 F. Supp. 32, 34
(E.D.N.Y. 1981) (innocence of owner does not by itself
prevent forfeiture). This reflects the legal fiction that the
object itself is the wrongdoer. Manufacturas International
Lida vy. Manufacturers Hanover Trust Bank. et al]
(Consolidated Bank Cases), F.Supp. _,1992WL 9212
(E.D.N.Y. 1992); United States v. One Mercedes-Benz 380
SEL VIN # WDBCA 33A]BB1033). 604 F. Supp. 1307,
1312 (S>D.N.Y. 1984) ("the vehicle itself is guilty of
facilitating crime"), aff'd 762 F.2d 991 (2d Cir. 1985).
Probable cause is "judged .. . by the court.” 19
U.S.C. § 1615; United States v. Sixteen Cases of Silk
Ribbons, 27 F. Cas. 1099 (D.C.N.Y. 1870) (question of
na
A-19
whether probable cause shown so as to shift burden to
claimants is a question for the court); [Three Thousand
One Hundred and Nine Cases of Champagne, 23 F. Cas.
1168 (D.C.N.Y. 1867) (same). Hearsay is admissible to
support the finding of probable cause. United States y.
4492S, Livonia Road, Livonia, N_Y., 889 F.2d 1258, 1267
(2d Cir. 1989) (hearsay proper, since holding otherwise
would undermine Congress’s intentional shif ting of the
burdens in forfeiture cases). As the Second Circuit has
explained:
In view of the unusual relative burdens of proof in
civil forfeiture proceedings, this court, as well as a
number of other circuits, has recognized an
exception to the requirements of Rule 56(e) that
supporting and opposing affidavits be based upon
personal knowledge and admissible evidence,
allowing the government to establish probabie
cause on the basis of hearsay affidavits.
eadieiiiics aaiikla oe |
A-20
897 F.2d 97, 101 (2d Cir. 1990). Circumstantial evidence
may be relied upon to show probable cause. United States
vy. $2,500 in United States Currency, 689 F.2d 10, 16 (2d
Cir. 1982), cert. denied sub nom. Aponte v. United States,
465 U.S. 1099 (1984)
In the instant case, first a magistrate judge and then
a district judge de novo determined that the government
had probable cause to believe the funds were forfeitable
The district court's hearing on probable cause required
three trial days in 199]. Post-hearing motions to
reconsider the probable cause issue were denied. See
United Statesv All Fundsetal. F.Supp. , 1992 WL
37087 (E.D.N.Y. 1992)
Once the government has demonstrated probable
cause, "the burden of proof shall lie upon” the claimant
‘ae
A-21
19 U.S.C. § 1615. Standing is "a threshold issue" for a
claimant wishing to contest forfeiture. United States y.
One 1982 Porsche 928 Three-Door [ icense Plate 1986/NJ
Temp/534807, 732 F.Supp. 447, 451 (S.D.N_.Y. 1990). If
the claimant does not have Standing, "the court lacks
jurisdiction to consider his challenge of the forfeiture.” Jd.
A claimant need not have actual or constructive ownership
to have standing; evena Possessory interest in the property
is sufficient. United States v. $37,590.00, 736 F. Supp.
1272, 1276 (S.D.N.Y. 1990).
[f a claimant has standing, it bears the burden of
proving by a preponderance of the evidence either |) that
the funds did not have their source in illegal drug
transactions and money-laundering, or 2) that it did not
know or constructively know -- through conscious
acer
A-22
avoidance of positive knowledge -- the source and nature
of the funds as drug-related (the innocent owner defense).
~., 889
F.2d 1258, 1267 (2d Cir. 1989).
The innocent owner defense is set out in the statute:
[N]o property shall be forfeited under this
paragraph, to the extent ofan interest of an owner,
by reason of any act or omission established by
that owner to have committed or omitted without
[his] knowledge... .
21 U.S.C. § 881(a)(7). "Owner" is defined as "any person
with a recognizable legal or equitable interest in the
property seized." United States vy. One Parcel of Real
Property, 831 F.2d 566, 567 (Sth Cir. 1987) (citing
legislative history). Ascertaining knowledge of corporate
claimants requires examining the contents of corporate
books and records and the actions taken by persons acting
4S Corporate agents.
To satisfy its burden of proof the claimant may not
simply attack the finding of probable cause. United States
Road in Chester, Vt., 916 F.2d 808, 812 (2d Cir. 1990),
cert. denied sub nom. Moreno y. United States Drug
Enforcement Admin, 111 S. Ct. 972 (1991). It has the
"ultimate burden of proving that the factual predicates for
forfeiture have not been met." Banco Cafetero, 797 F.2d
at 1160. Ifthe claimant cannot establish that the funds are
untainted or that it is an innocent owner, the property is
forfeited.
The structure of this kind of case is inherently
unfair to claimants which must prove that their money is
legitimate after the funds have already been seized by the
A-24
government. The government needs only to show
probable cause to seize. The difficulty in proving in an
American court the legitimate origins of particular assets
from abroad is pronounced.
Foreign enterprises conducting business in a
foreign language utilizing business practices different from
those known to American jurors are at a particular
disadvantage. Moreover, it is often difficult to prove a
negative, as claimants must. (Yet, the jury was able to
precisely differentiate those cases warranting forfeiture
from those in which money was not subject to forfeiture.
The diligence and determination of this American jury to
be fair to foreign claimants is striking.)
A claimant that surmounts all hurdles and wins a
jury verdict is entitled to receive its money promptly. In
oe
A-25
the instant case the hearing on whether the government
had probable cause to seize the funds were not completed
until nine months after the funds were seized. The trial
was completed more than a year later. Few businesses can
function without access to a substantial portion of their
assets for that period of time. The claimants who met
their burden at trial of proving the legitimate source of
their funds will have their money returned to them without
any other compensation except interest earned, less court
fees for supervision of the funds. They will have been
without the use of their money for the two years since the
funds were seized.
If. APPLICATION OF LAW TO FACTS
A. MOTION FOR JUDGMENT
NOTWITHSTANDING THE VERDICT
Under Rule 50(b) of the Federal Rules of Civil
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Procedure a judge may disregard the jury’s verdict only
if the evidence, viewed in the light most favorable
to the non-movants without considering credibility
or weight, reasonably permits only aconclusion in
the movants’ favor.
Sirota v. Solitron Devices, Inc., 673 F.2d 566, 573 (2d
Cir.), cert. denied, 459 U.S. 838, cert. denied sub nom.
Lous Sternbac & Co. y. Sirota. 459 U.S. 908
(1982). The court should disregard a jury determination
for which "there is no legally sufficient evidentiary basis
enabling a reasonable jury to make it." 199] Ady.
Committee Notes to Rule 50(b).
In the course of the two-month trial in the instant
case, the jury conscientiously listened to theevidence. took
notes, and was extremely careful in the course of its
decision-making. The jurors were provided with
notebooks with dividers to enable them to address
ef
A-27
separately each claimant and each claim in the trial. The
fact that the jury decided in favor of the government on
some claims and in favor of the claimants in others belies
any suggestion that their deliberations were not thorough.
The evidence, briefly reviewed below, supported the jury’s
verdict as to each claimant and each claim.
The following claimants sought the following
amounts at trial: CONFECCIONES ZUNY LTDA,
$440,000; CREACIONES IVONNE LTDA, $32,000:
CREACIONES KAREN LTDA, $756,625; INCOLCO
LTDA, $1,000,000; MANUFACTURAS DE MODAS
LTDA, $400,000; TOTE EXPORT MANUFACTURAS
LTDA, $392,860; VALERY FASHIONS LTDA,
$448,418; ABUCHAIBE HNOS., $200,000 and $54,070:
COMERCIAL ESTRELLA LTDA, $301,500:
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CONFECCIONES Y TEJIDOS NACIONALES LTDA,
$549,990; CREACIONES VIVIANA LTDA, $125,025,
$50,030, and $50,000; INDUSTRIAS MARATHON
LTDA, $805,194.49; MANUFACTURAS
INTERNACIONALES LTDA, $599,970:
MANUFACTURERA DEL ATLANTICO LTDA,
$492,810; SSRACUSA TRADING CO. and the HEIRS
OF HERIBERTO CASTRO-MESA, $3,400,000:
MANUFACTURAS J.D. LTDA, $98,991:
ORGANIZACION J.D. LTDA, $98,990 and $98,800:
and CONFECCIONES ELIZABETH LTDA, $40,000.
The evidence of the claimants indicated -- if
believed -- that massive shipments of manufactured
garments were sent abroad from modern plants in
Colombia to Panama in order to earn dollars legitimately.
a
A-29
There they were handed over to ship Captains who toured
the Caribbean islands trading the garments for goats and
local produce, losing some, having some stolen, and with
the remainder disposed of through charity in Colombia
and other non-traceable channels. Although possible,
these and other impiausible stories told by claimants’
witnesses would justify the jury’s skeptical view of the
claimants’ somewhat inconsistent positions.
The evidence of drug tainting was overwhelming.
A flurry of wire transfer activity followed the arrests of the
Londono associates Jurado, Garcia, and Mahecha in
Luxembourg. There wasa sophisticated and complicated
series of connections and financial transactions between
the various drug-connected players in this case. After a
description of one technique described at trial, the
A-30
evidence will be more generally summarized.
l. INDUSTRIAS MARATHON LTDA
When the Londono associates were arrested in
Luxembourg, authorities seized telephone books,
documents, and bank records. Garcia had a business card
with a bank account number written on the reverse. The
same number had appeared on one of the faxes intercepted
by the Luxembourg Surété Publique from Jurado’s
apartment in Luxembourg. The account was ata bank in
Guernsey, Channel Islands.
Investigation by the Surété revealed that Garcia
earlier had arranged for $805,194.49 to be sent to the
Guernsey bank from Panama by a Panamanian shell
corporation nominally headed by Heriberto Castro-Mesa
and Esperanza Rodriguez de Castro, Londono’s parents-
Te
A-31
in-law. Funds from the account in Panama which was the
source of the $805,194.49 had been used in 1987 to open
other accounts in the name of Heriberto Castro-Mesa and
Esperanza Rodriguez de Castro. The other funds in the
Panamanian account were forfeited after the Luxembourg
trial of Jurado and Garcia.
When $805, 194.49 was electronically transferred to
Colombian claimant Industrias Marathon via a New York
bank immediately after the arrests in Luxembourg, the
money was seized. The testimony of the Analyst Holmes,
the C.P.A. Kostoglian, and the former Londono associates
confirmed the illicit source of the funds, The evidence was
sufficient for a jury to conclude that the funds were the
traceable proceeds of illegal drug money-laundering and
narcotics transactions, and that claimants were aware of
A-32
the drug-related sources of the funds.
a OTHER FORFEITED CLAIMS
At the Luxembourg arrests several pocket address
books were seized. Garcia's book contained the telephone
numbers for representatives of the claimants, linking them
with a known money-changer and drug money-launderer,
Jairo Carrascal. In Colombia authorities seized a
telephone book from another known drug money-
launderer, Roberto Juri. Many of the numbers in the two
telephone books, seized continents apart, were identical.
Witnesses also testified that the bank accounts and
records of the corporate claimants were inconsistent with
the conduct of a legitimate clothing manufacturing
enterprise. The evidence at trial conclusively established
that the corporate records and bank statements revealed
A-33
a pattern of huge same day deposits and debits reflective
of drug money-laundering practices.
Special Customs Agent Steven Haywood of the
United States Customs Service set up a phony bank
account and entered the drug money-laundering business
as a purported money-changer. Periodically he received
large amounts of cash driven in cars from the New York
City area, originating in cocaine sales there. While
conducting his covert money-laundering investigative
operation, Haywood was instructed by a money-changer
to send electronic funds transfers to corporations
including claimants. Special DEA Agent Robert
Michaelis testified that an account at Banco Cafetero in
Panama was used by Londono and his associates to store
and move narcotics proceeds. The account was identified
A-34
only by anumber. Money was transferred from the Banco
Cafetero account to the claimants. Claimants also
received electronic funds transfers from several of the
identified sheil corporations set up by Londono’s
associates.
Claimants objecting to the verdicts of forfeiture
have made no showing that the evidence "reasonably
permits only a conclusion in thefir] favor." Sirota v.
Solitron Devices, Inc. 673 F.2d 566, 573 (2d Cir.), cert.
denied, 459 U.S. 838, cert denied sub nom. Louis
Sternbach & Co. vy. Sirota, 459 U.S. 908 (1982). The
verdicts as to each claimant and each claim were
supported by the evidence. The motions for judgment
notwithstanding the verdict are denied.
3. MANUFACTURAS J.D. LTDA --
$98,991
Te
A-35
ORGANIZACION J.D. LTDA -- $98,990
and $98,800
The jury at trial determined that claimants
Manufacturas J.D. and Organizacion J.D had met their
burden of proving that the funds were not the traceable
proceeds of illegal drug activity and drug money-
laundering transactions. The government apparently does
not now contest the jury’s conclusions. The evidence
which could reasonably have been believed by a jury
supports the verdict.
4. CONFECCIONES ELIZABETH
LTDA - $40,000
The jury at trial determined that even though the
funds claimed by confecciones Elizabeth were the
traceable proceeds of illegal drug activity and drug money-
laundering transactions, claimant had met its burden of
i
A-36
proving that it was an innocent owner. It did not "know,"
through its books and records orcorporate representatives
and agents, that the funds in question constituted the
traceable proceeds of illegal drug activity and drug money-
laundering transactions The government apparently does
not now contest the jury’s conclusions. The evidence
which could reasonably have been believed by a jury
supports the verdict
B. MOTION FOR A NEW TRIAL
The court has the power to grant a new trial, even
where the verdict was justifiable, to prevent a nuscarriage
of justice. Under Rule 59(a) of the Federal Rules of Civil
Procedure, a court may grant a new trial if
the jury has reached a seriously erroneous result. or
... the verdict is a "miscarriage of justice” ie... .
the verdict is against the great weight of the
evidence ...
| Cena nee
A-37
Mallis v. Bankers Trust Co., 717 F.2d 683, 691 (2d Cir.
1983). The standard is difficult to meet. The claimants
have raised a number of arguments in support of their
motion for a new trial. Each will be addressed in turn.
l. SHIFTING BURDEN OF PROOF |
At the hearing on the post-trial motions claimants
posed the question whether the shifting of the burdens of
proof in forfeiture cases in constitutional. Were a
constitutional violation found, a new trial or dismissal
would be required. No such remedy is necessary.
The Second Circuit in United States v. Banco
Cafetero Panama, 797 F.2d | 154 (2d Cir. 1986), discussed
the probable cause requirements where moneys in bank
accounts are at stake:
In almost all cases, once the Government has
shown probable cause to believe that someone has
A-38
sold drugs and deposited the proceeds of a drug
sale into a bank account, there will be probable
Cause to believe that the bank account contains
"traceable proceeds” of the sale... . The burden
wil then be on the claimant to demonstrate that no
portions of the account ... are "traceable
proceeds” of the drug sale.
Id. at 1160. The court went on to discuss the concerns
about burden-shifting and the difficulty of proof:
No doubt uncertainty caused by the fungibility of
money will make it difficult and in may cases
impossible for claimants to satisfy this burden. But
it is precisely the function of burden of proof rules
to determine which party loses where evidence is
lacking or at best ambiguous. Under the
Congressional scheme, the risk of uncertainty in
determining the traceability of proceeds of drug
sales is placed squarely on the claimant, once
probable cause has been established.
The district court is bound by the Second Circuit's
determination that Congress’ allocation of the burdens of
proof in forfeiture proceedings is constitutional. United
Te
‘rr
A-39
States v, 228 Acres of Land and Dwelling Located on
White Hill Road in Chester, Vt, 916 F.2d 808, 812 (2d
Cir. 1990), cert, denied sub nom. Moreno v. United States
Drug Enforcement Admin., 111 S. Ct. 972 (1991). The
court wrote: "we find nothing unconstitutional in
congress’s allocation of the burdens of proof in forfeiture
cases...." Id. at 814; United States v. $2,500 in United
States Currency, 689 F.2d 10, 12 (2d Cir. 1982) (same),
cert, denied sub nom. Aponte v. United States, 465 U.S.
1099 (1984); United States y, $250,000 in United States
Currency, 808 F.2d 895, 901 (Ist Cir. 1987) (shifting
burdens does not violate fifth amendment); United States
y. Santoro, 866 F.2d 1538, 1544 (4th Cir. 1989) ("We...
find the burden-shifting aspect of the statute
constitutional."); United States v. One 1970 Pontiac GTO,
A-40
2-Door Hardiop, 529 F.2d 65, 66 (9th Cir. 1976) (per
Curiam) (imposition of burden of proof on the claimant is
not unconstitutional); Bramble v. Richardson, 498 F.2d
968, 970 n.2 (10th Cir.) ("[Claimant]'s conception of the
forfeiture proceedings is not entirely accurate. .. . [T]he
burden merely shifts to [him] once probable cause has been
established."), cert. denied sub nom. Bramble vy. Saxbe.
419U.S. 1069(1974); see also United States v. Blackwood,
47 F.2d 849, 851-52 (1st Cir.) (imposing burden of proof
on the government was error where probable cause had
already been found), cert. denied, 284 U.S. 627 (1931).
The motion for a new trial on this ground must be denied.
2. SEPARATE TRIALS
Claimants argue that they were prejudiced by the
court’s refusal to grant separate trials. The claimants
A-4]
contend that the jury was unable to keep the evidence
separated as to each claimant and ascribed to some
claimants evidence of drug tainting related solely to other
claimants. Claimants move for a new trial on this ground.
The court first addressed the issue of prejudice
from joinder in allocating peremptory challenges among
the claimants at the outset of the trial. The jury panel was
not large enough to permit each claimant to independently
exercise a full set of peremptory challenges. Many
potential jurors did not feel they could be fair in a drug-
related case. Ultimately a jury representative of the
community was selected.
Sharing of peremptory challenges was proper
because the interests of the claimants were not adverse to
one another. Accord Doralee Estates Inc. v. Cities Sery.
cc a eae a
A-42
Oil Co., 569 F.2d 716, 723 (2d Cir. 1977) (plaintiff allowed
his three challenges but defendant and third-party
defendant required to exercise one each and three jointly);
Carey v. Lykes Bros, S.S. Co., 455 F.2d 1192, 1194 (Sih
Cir. 1972) (district court’s sharing procedure "expressly
authorized by Section 1870"); Moore v. South Afncan
Marine Corp., 469 F.2d 280, 281 (Sth Cir. 1972) (no error
to require shared challenges even where party *=yects).
Separate trials were not required because the
claimants’ interests were not hostile. All claimants had the
same burden against the government and all wanted the
return of their funds. Although some evidence of the
background drug money-laundering scheme ov erlapped,
each claimant presented its own evidence to meet its own
burden of proving that the funds it claimed were not the
enema
A-43
traceable proceeds of illegal drug activity and drug money-
laundering transactions. The fact that some claimants
were required to prove both the legitimate source of funds
and that they were innocent owners, whereas others
attempted to prove only that they were innocent owners,
does not change this conclusion.
Severance would have severely burdened the court
and government. Accord City of New York v. Joseph L.
Balkan, Inc., 656 F. Supp. 536, 549-50 (E.D.N.Y. 1987).
Separate trials would have been a waste of judicial
resources and would have caused extreme inconvenience
to witnesses. The trial was prolonged even in its combined
form because of the necessity for translation of the bulk of
the testimony and the need to instruct the jury on technical
financial matters. Denial of the motion to sever in such
A-44
circumstances is proper. Cf United States y. Marietta
Mig. Co., 53 F.R.D. 390, 400 (S.D.W. Va 1971) (motion
for separate trial denied to avoid protracted delay and
duplication of effort). Whether to order separate trials is
within the discretion of the trial court. Brown vy.
Advantage Eng’g, 732 F. Supp. 1163, 1170 (N.D. Ga.
1990), Keister v. Dow Chem. Co., 723 F. Supp. 117, 120
(E.D. Ark. 1989).
That the jury was not confused or claimants
prejudiced is reflected in the discriminating verdicts,
finding some claims valid and other invalid. The precise
questions of the jurors during deliberations, their note-
taking, and their calm attentiveness all belied confusion or
prejudice. A joint trial was proper.
A-45
3. OMNIBUS CRIME CONTROL AND
SAFE STREETS ACT
Claimants charge that the court erred in permitting
the government to introduce into evidence wire transfer
advises obtained in violation of the Omnibus Crime
Control and Safe Street Act, 18 U.S.C § 2510 et seg. (1988
& Supp. III 1991), the federal wiretap statute. The statute
prohibits theinterception of "electronic communications."
which includes a variety of technologies such as electronic
funds transfers and electronic communications in storage.
The court has already addressed the claimants’
arguments, in Manufacturas International Ltda vy.
Manufacturers Hanover Trust Bank. et al. (Consolidated
Bank Cases), F.Supp. __, 1992 WL 96212 (E.D.N.Y.
1992). The complaint was dismissed on the ground that
the federal wiretap statute does not apply to the seizure of
A-46
electronic funds transfers by banks following government
and court instructions. See 1992 WL 96212, at *10; 1968
U.S. Code Cong. & Admin. News 2112, 2153; United
States v. Herring, 933 F.2d 932, 934-35 (11th Cir. 1991)
(amendments did not change statute’s focus on
surveillance and eavesdropping).
The wiretap statute does not apply because in
forfeiture proceedings tainted property is considered
forfeited at the moment the illegal act is committed. 18
U.S.C. $981(b) (1988 & Supp. I11 1991), 21 U.S.C. § 881(h)
(1988 & Supp. III 1991) ("relation-back" doctrine); See,
e.g., United States v. One Piece of Real Property Located
on Trafalgar Street in City of Aiken. S.C. 700 F. Supp
857, 860-61 (D.S.C. 1988) (date on government's ttle
relates back to date of crime), aff'd subnom. United States
A-47
vy. Schiferli, 895 F.2d 987 (4th Cir. 1990). As the
Consolidated Bank Cases court wrote:
The statute cannot apply where, as here, the
government reasonably viewed the funds as its
own. The concept that ownership of the object is
transferred instantaneously at the time of
criminality provides a conceptual distinction
making the laws governing wiretapping and
interference with communications irrelevant.
1992 WL 96212, at *10.
Finally, claimants’ unsupported assertion that the
introduction into evidence of the wire transfer advises
violated the fourth amendment is groundless. The motion
for a new trial on this ground is denied.
4. NEW YORK BANKS
Claimants contend that the court erred in not
overruling the protective order granted by the magistrate
judge. The magistrate judge prohibited theclaimants from
taking depositions or issuing subpoenas to employees of
A-48
the intermediary New York banks which seized the wire
transfers. In their deposition and subpoena requests
claimants sought information about the instructions given
to the banks by the United States Attorneys.
In Consolidated Bank Cases, F.Supp. _, 1992
WL 96212 (E.D.N.Y. 1992), the court disposed of
claimants’ concerns about the seizure of the subject funds
by the New York banks. The court dismissed the action
for failure to state a claim, noting that the banks were not
rogue banks seizing funds carelessly or without
justification. The intermediary banks were
following the precise oral and written instructions
of the United States Attorney and the court.
Id. at *15. Since electronic funds transfers are affected
rapidly, the government must be permitted to act without
any interference by the banks. The banks normally should
not make any independent determinations.
Te |
iS ete dda
A-49
Where banks act as agents of the court they are
protected. Id.; cf K/S Norman Agather v. Sea Trade &
Constr, Lid., 767 F. Supp. 60, 62-63 (S.D.N.Y. 1991)
(same where bank executes writ of attachment).
Claimants require nothing further from the employees of
the bank. The protective order was proper.
5. UNITED STATES ATTORNEYS
Claimants complain that the court granted the
government's motion in limine barring claimants from
calling the United States Attorneys as witnesses at trial.
The court has twice addressed claimants’ desire to elicit
information from the United States Attorneys.
During discovery claimants sought to depose the
United States Attorneys involved in this case, but the
magistrate judge granted the government’s motion for a
A-S0
protective order. The magistrate judge determined that
the taking of opposing counsel's deposition is permissible
only where (1) there is no other way to obtain the
information; (2) the information sought is relevant and
non-privileged; and (3) the information is crucial to the
preparation of the case. See, e.g.. Shelton vy. American
Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 1986).
The protective order was granted in part because
the information could be obtained elsewhere and in part
because it is undesirable for United States Attorneys to
appear as witnesses at trial] to defend statements made at
deposition. The magistrate judge's decision was proper.
The court dismissed an action filed by claimants against
the United States Attorneys who had instructed the banks
to seize the funds. Abuchaibe Hnos. v. Maliz etal, CV
ee
A-5]
92-528 (oral decision).
The claimants have offered nothing to alter the
conclusions reached by the magistrate judge and the
district judge. There was no relevant information to be
obtained from the United States Attorneys who acted
ethically and responsibly in connection with the seizure of
wire transfers at the New York correspondent banks.
6. EXPERT TESTIMONY
Claimants objected to the court’s permitting DEA
Intelligence Analyst Holmes and Special DEA Agent
Michaelis to testify and to state opinions. Agent Michaelis
testified on the basis of the evidence and known drug
money transfer techniques that several of the electronic
wire transfers wee intended for receipt by Jose Santa Cruz
Londono. There was also testimony about the existence
———————————————
A-52
of an overall drug money-laundering scheme. This
testimony was based on the evidence at trial as well as the
expertise of the witness.
Given the complex nature of the evidence, the jury
was aided by this expert testimony. See Fed. R. Evid. 702,
703. Its probative force heavily outweighed any prejudice.
Id. Rule 403. DEA agents may testify as experts on legal
activities such as narcotics dealing. United States v.
Campino, 890 F.2d 588, 593 (2d Cir. 1989), cert. denied.
111 S. Ct. 179, cert, denied sub nom. Estrada Rus
v.United States. 494 U.S. 1068 (1990). Sophisticated drug
money-laundering activities, such as those relied upon by
claimants, are a proper subject for expert testumony. The
methods of moving of currency internationally and the
maintaining of corporate and bank records are not
i
_
A-53
subjects easily understood without some expert assistance.
The jury was repeatedly admonished not to substitute the
expert's opinions for the jury’s own conclusions about the
veracity of the testimony and the meaning of the records
which constituted the bulk of the evidence.
The court has broad discretion in determining the
qualifications of and need for expert witnesses. Hamling
y, United States, 418 U.S. 87, 108 (1974). Claimants have
not demonstrated that the court’s determination was
“manifestly erroneous." Salem v. United States Lines Co.,
370 U.S. 31, 35 (1962). The witnesses were properly
qualified and their limited testimony useful and non-
prejudicial.
‘J BEST EVIDENCE RULE
Claimants’ argue that the government’s expert
"
A-54
accounting witness should not have been permitted to
testify as to capital investment, accounting and banking
practices, and estimated profits from business enterprises.
The testimony was amply supported by, and required by,
the huge amount of financial documentary evidence.
Claimants argue that this testimony violates the
best evidence rule. The best evidence rule refers to and
governs the admission of the contents of "a writing,
recording, or photograph.” See Fed. R. Evid. art X. It
has no application to the testimony of an expert witness
summarizing and analyzing evidence already in the record.
Cf. id. Rule 1006. The objection is groundless.
i MOTION TO RELEASE RES
Claimants Manufacturas J.D and Organizacion
J.D.. which sustained their burden at trial of proving that
8 ee |
A-55
their claimed funds were not the traceable proceeds of
illegal drug activity and drug money-laundering
transactions, move for the immediate release of their
funds. The government seeks a delay in the release of
funds on the grounds that Johnny Daccarett, the owner
and legal representative of claimant corporations
Manufacturas J.D. and Organizacion J.D., isa fugitive.
The government contends that Johnny Daccarett
hasa priorconviction for trafficking in approximately two
tons of marijuana. There is also an outstanding
indictment against him in New Jersey for tax violations.
[t is the government’s position that since Daccarett is a
fugitive, theclaimant corporations he represents should be
barred under the disentitlement doctrine from receiving
funds they rightfully claim.
A-56
The disentitlement doctrine provides that one who
is a fugitive from justice cannot seek relief from the
judicial system the authority of which he is flouting by
fleeing prosecution. Ifa party is avoiding prosecution for
a crime, he cannot lay claim to money or property in a
related civil proceeding. See, e.g.. United States v. 760 SW
Ist Street, Miami, Fla.. 702 F. Supp. 575,577 (W.D.N.C.
1989) ("[since he] fits the definition of a fugitive, .. . he
may not demand to use the resources of this Court in a
civil action to claim property").
1. FUGITIVE STATUS
The first question is whether Daccarett can be
considered a fugitive. Claimants Manufacturas J.D. and
Organizacion J.D. contend that there has been no showing
that Daccarett was ever in this jurisdiction, let alone a
————ee |
A-57
Showing that he fled to avoid prosecution.
A person can be a fi ugitive even when he does not
"flee" but is simply found outside the jurisdiction. See
Jhirad v. Ferrandina, 536 F.2d 478, 483-84 (2d Cir.) (no
meaningful distinction between those leave the jurisdiction
and those who have already left and decide not to return),
cert. denied, 429 U.S. 833 (1976): United States vy. 218
Panther Street, Newfoundland, Pa. 745 F. Supp. 118, 121
(E.D.N.Y. 1990) ("An individual who learns of charges
against him while legally outside the jurisdiction
‘constructively flees’ by deciding not to return."), aff'd sub
nom. United States v. Eng, 951 F.2d 461 (2d Cir. 1991).
To be considered a fugitive, the individual need not flee or
“constructively flee" with the intent of avoiding a pending
or intended prosecution. United States v. Real Property
iii
A-58
Located at Incline Village, 755 F. Supp. 308, 309(D. Nev.
1990) ("whether [he] left before or after . . . indictment is
irrelevant"; nor need there even be an official indictment
handed down). Even where an individual is in prison
elsewhere or it is otherwise impossible for him to leave, he
can be considered a fugitive. See, ag.. United States v.
Eng, 951 F.2d 461, 4 4 (2d Cir. 1991) ("One may flee even
though confined in prison in another jurisdiction.").
It is critical to show that the person sought in the
criminal proceeding knows he is wanted by the authorities
and then fails to submit to arrest. See United States v.
Pole No. 3172. Hopkinton. 852 F.2d 636, 644 (Ist Cir.
1988) ("Perhaps most importantly, there is no evidence
that [the claimant] had notice of this proceeding .. . .");
United States y. Ballesteros-Cordova, 586 F.2d 1321,
i A
A-59
1323-24 (9th Cir. 1978) (intent to avoid prosecution,
making an individual a fugitive, can be inferred where he
knows the authorities want him and he fails to surrender):
United States y. Rea] Property Located at Incline Village,
755 F. Supp. 308, 309 (D. Nev. 1990) (noting that
individual was "aware of both the indictment and the civil
forfeiture action"): United States v. Schreiber, 535 F.Supp.
i359, 1363 (S.D.N.Y. 1982) (individual who left the
country in 1964 became a fugitive in 1966 when he learned
he was under indictment and made no effori to return).
We assume that Daccarett was aware of the
criminal charges pending against him since the
government brought this fact to claimants’ attention, and,
through them, to their representative Daccarett. There
was no legal barrier to his return to the United States. He
——
A-60
should be, and is, treated as a fugitive.
2. "DISENTITLEMENT" DOCTRINE
An individual who is a fugitive can be barred by the
disentitlement doctrine from receiving seized funds. By
extension, the government's position is that the claimant
corporations which Daccarett represented should also be
prevented from receiving the funds they claim. A brief
explanation of the disentitlement doctrine and its
development is necessary to understand the parties
positions.
The first statement of the disentitlement doctrine
was in the context of a criminal proceeding, where the
Supreme Court declined to adjudicate an appeal from the
merits of a conviction where the appellant was a fugitive.
Molinaro v. New Jersey, 396 U.S. 365, 366 (1970). Courts
A-61
extended this doctrine to bara fugitive from Participating
in a civil proceeding based on a prior criminal proceeding.
In Conforte v. Commissioner, 692 F.2d 587, 589-90 (9th
Cir. 1982), the Ninth Circuit held that a fugitive could not
contest the assessment of tax liabilities in a civil
proceeding where he was a fugitive from the related
criminal tax proceeding.
Finally, in 1985 the Ninth Circuit held that the
disentitlement doctrine should apply in civil forfeiture
proceedings. United States y. $129.374 in United States
Currency, 769 F.2d 583, 587-88 (9th Cir. 1985), cert
denied sub nom. Geiger v. United States, 474 U.S. 1086
(1986). The doctrine bars not only the fugitive but also the
fugitive’s successor from contesting the forfeiture while at
the same time resisting prosecution in a related criminal
A-62
action. Id. at 587. No case has been found addressing the
question now posed: whether a corporation represented by
a fugitive should also be barred by the disentitlement
doctrine from claiming funds in a forfeiture proceeding.
A trial court has discretion in applying the
disentitlement doctrine. United States v. Veliotis. 586 F.
Supp. 1512, 1514 (S.D.N.Y. 1984) ("this matter resides
within the sound discretion of the Court"). The reasons
for exercising discretion in the claimants’ favor are
overwhelming. First, in this case no credible evidence has
been submitted demonstrating that the "fugitive" controls
any claimant or that he will receive the benefit of proceeds
returned to a claimant. Nor is there any evidence to
suggest that Daccarett is flouting the judicial system in this
forfeiture case. On the contrary, the attorney for
A-63
Claimants Manufacturas J.D. and Organizacion J.D.
asserts that Daccarett has been willing to be deposed in
person at an embassy in Colombia or by telephone but the
government has refused.
Finally, the civil forfeiture is independent of the
criminal case pending against Daccarett. In disentitlement
cases the criminal indictment, prosecution, or potential
prosecution should be related to the forfeiture proceeding.
United States v. $129,374 in United States Currency, 769
F.2d 583, 588 (9th Cir. 1985) ("[the] criminal conviction
and the property involved... are integrally related parts
of the same unlawful drug dealing scheme"), cert. denied
sub nom. Geiger y. United States, 474 U.S. 1086 (1986);
Schuster v. United States, 765 F.2d 1047, 1049 (11th Cir,
1985) ("no question that the civil case. . . is related to the
A-64
criminal case"); United States v. $45,940 in United States
Currency, 739 F.2d 792, 794 (2d Cir. 1984) (question is
whether his fugitive "status bars him from defending
the relaied forfeiture proceeding”) (emphasis added). In
this All Funds case, the indictment at issue is in a different
district and it is for tax violations. The government has
not suggested that the tax violations are related to the drug
money-laundering activities underlying this All Funds
action.
Itis the claimant corporations, Manufacturas J.D
and Organizacion J.D.. which prevailed at trial -- not
Johnny Daccarett. The government has shown no
persuasive reason to bar the corporate claimants from
receiving their funds. The jury found that the funds were
not the traceable proceeds of illegal drug activity and drug
Le
A-65
money-laundering transactions. Daccarett’s status as a
fugitive is irrelevant. The motion to release the res must
be granted.
D. MOTION TO STAY JUDGMENT AND
WAIVE SUPERSEDEAS BOND
Claimants Abuchaibe Hnos., Comercial Estrella
Lida, Confecciones y Tejidos Nacionales Ltda. Creaciones
Viviana Ltda, Industrias Marathon Ltda, Manufacturas
Internacionales Ltda. and Manufacturera del Atlantico
Lida move for an order Staying execution of judgment
pending appeal without Posting a supersedeas bond.
Since the funds are in the Possession of the court
and gathering interest, there wil] be no prejudice to the
government from a stay of execution of judgment. Nor is
there any risk that the property will be removed:
cra
A-66
Unlike the typical case where the defendant ship
stealthily absconds from port and leaves the
plaintiff with no res from which to collect, here the
defendant res is in the possession of the United
States and thus in no danger of disappearing. .. .
Having prevailed below, the government, if it wins
On appeal is assured of execution regardless of
whether [claimant] files a bond or stays execution
of the judgment.
1,913
F.2d 1106, 1109 (4th Cir. 1990); see also United States v.
One Lot of $25.72] in Currency, 938 F.2d 1417, 1419 (Ist
Cir. 1991) (supersedeas bond not required).
IV. | CONCLUSION
The jury’s verdict of forfeiture of eighteen of the
twenty-two amounts seized is fully supported by the
evidence. The motions for judgment notwithstanding the
verdict are denied. No errors warrant granting the
motions for a new trial. The amounts claimed by
a
A-67
Manufacturas J.D. and Organizacion J.D. are ordered
released in seven days from the date of this memorandum:
the delay will permit application for a stay in the Court of
Appeals. Execution of the judgment of forfeiture of funds
claimed by Abuchaibe Hnos., Comercial Estrella Ltda,
Confecciones y Tejidos Ltda, Creaciones Viviana Ltda,
[ndustrias Marathon Ltda, Manufacturas Internacionales
Ltda, and Manufacturera del Atlantico Ltda is stayed
during the pendency of the appeal. No supersedeas bond
is required.
SO ORDERED.
Jack B. Weinstein
United States District Judge
Dated: Brooklyn, New York
August 5, 1992
es
A-68
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
x
UNITED STATES OF AMERICA
Plaintiff, FINAL
-against- JUDGMENT
AND
ALL FUNDS ON DEPOSIT IN ORDER
ANY ACCOUNTS MAINTAINED CV-90-2510
AT MERRILL LYNCH, PIERCE,
FENNER & SMITH, ET AI .
Defendants.
The issues in the above-captioned action were tried
before a jury in the Eastern District of New York from
March 9, 1992 through May 8, 1992; and
Nineteen claimants and the plainuff UNITED
STATES OF AMERICA presented witnesses and documen-
tary evidence; and
The jury considered the issuesin this action and, after
A-69
due deliberation, rendered a unanimous verdict on May 8,
1992 forfeiting the following funds to plaintiff UNITED
STATES OF AMERICA after deciding that the following
fifteen claimants had failed to meet their burden of proving
that the eighteen claimed amounts were not the traceable
proceeds of illegal drug activity or drug money-laundering
transactions or that they were innocent owners:
1. Claimant: CONFECCIONES ZUNY LTDA
Amount: $440,000
. Claimant: CREACIONES IVONNE LTDA
Amount: $32,000
. Claimant: CREACIONES KAREN LTDA
Amount: $756,625
. Claimant: INCOLCO LTDA
Amount: $1,000,000
Claimant: MANUFACTURAS DE MODAS
LTDA
Amount: $400,000
. Claimant: TOTEEXPORT MANUFACTURAS
LTDA
Amount: $392,860
. Claimant: VALERY FASHIONS LTDA
Amount: $448,418
bho
2
>
al
ON
—~
ee
A-70
8. Claimant: ABUCHAIBE HNOS
Amount #1: $200,000
Amount #2: $54,070
9 Claimant: COMERCIAL ESTRELLA LTDA
Amount: $301,500
10. Claimant: CONFECCIONES Y TEJIDOS
NACIONALES LTDA
Amount: $549,990
11. Claimant:CREACIONES VIVIANA LTDA
Amount #1: $125,025
Amount #2: $50,033
Amount #3: $50,000
12. Claimant: INDUSTRIAS MARATHON LTDA
Amount: $805,194.49
13. Claimant: MANUFACTURAS INTERNACIO-
NALES LTDA
Amount: $599,970
14. Claimant: MANUFACTURERA DEL ATLAN-
TICO LTDA
Amount: $492,810
1$. Claimant: SIRACUSA TRADING Co. and the
HEIRS OF HERIBERTOCASTRO-
MESA
Amount: $3,400,000; and
The jury rendered a unanimous verdict on May 8,
1992 returning the sum of $98,991 to claimant MANUFAC-
TURAS J.D. LTDA after deciding that the claimant had
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met its burden of proving that the claimed amount was not
the traceable proceeds of illegal drug activity or drug
money-laundering transactions: and
The jury rendered a unanimous verdict on May 8,
1992 returning the sums of $98,990 and $98,800 to claimant
ORGANIZACION J.D. LTDA after deciding that the
claimant had met its burden of proving that the two claimed
amounts were not the traceable proceeds of illegal drug
activity or drug money-laundering transactions; and
They jury rendered a unanimous verdict on May 8,
1992 returning the sum of $40,000 to claimant CONFECCI-
ONES ELIZABETH LTDA after deciding that the claimant
had met its burden of proving that it was an innocent owner
of the claimed amount.
ORDERED AND ADJUDGED that the sum of
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$10,098,495.49 plus all accrued interest from the time of
deposit with the court, less fees, is hereby condemned and
forfeited to the use and benefit of the UNITED STATES of
AMERICA; and that the sum of $10,098,495.49 plus all
accrued interest from the time of deposit with the court, less
fees, be turned over to the UNITEDSTATES OF AMERI-
CA in seven days and that the Clerk of the Court issue a
check in the total amount payable to "United States Mar-
shals Service" and then forward that check to United States
Attorney, ATTN: Arthur P. Hui, Esq., One Pierrepont
Plaza, 11th Floor, Brooklyn, NY 11201; this order is stayed
pending completion of appeals.
ORDERED AND ADJUDGED that the sum of
$98,991 plus all accrued interest from the time of deposit
with the court, less fees, be returned to claimant MANUFA-
A-73
CTURAS J.D. LTDA in seven days and that the Clerk of
the Court issue a check in the total amount payable to
"Isidoro Rodriguez, Esq. as Attorney for Manufacturas J.D.
Ltda" and then forward that check to Isidoro Rodriguez,
Esq., Calle 84 No. 56-51, Piso 2, Office 4, Barranquilla, CO-
LOMBIA.
ORDERED AND ADJUDGED that the sums of
$98,990 and $98,800, plus all accrued interest from the time
of deposit with the court, less fees, be returned to claimant
ORGANIZACION J.D. LTDA in seven days and that the
Clerk of the Court issue a check in the total amount payable
to "Isidoro Rodriguez, Esq. as Attorney for Organizacion
J.D. Ltda" and then forward that check to Isidoro Rodri-
guez, Esq., Calle 84 No. 56-51, Piso 2, Office 4, Barranqui-
lla, COLOMBIA.
aaa i
A-74
ORDERED AND ADJUDGED that the sum of
$40,000, plus all accrued interest from the time of deposit
with the court, less fees, be returned to claimant CONFEC-
CIONES ELIZABETH LTDA in seven days and that the
Clerk of the Court issue a check in the total amount payable
to "Davis Markel & Edwards - Trust Account” and then
forward that check to M. Blair Sibley, Esq., Davis Markel
& Edwards, 66 West Flagler Street, Suite 1100, Miami,
Florida 33130.
ORDERED, ADJUDGED, AND DECREED that
pursuant to Rules 54(b) and 58 of the Federal Rules of
Procedure the Clerk of the Court enter final judgment.
SO ORDERED.
LS/
Jack B. Weinstein
United States District Judge |
Dated: Brooklyn, New York, August 5, 1992
EE a ee F
A-75
UNITED STATES COURT OF APPEALS
For the Second Circuit
Nos. 1264, 1265---August Term 1992
(Argued: April 2, 1993
Decided: Sep. 10 1993)
Docket Nos. 92-6229, 92-6259
UNITED STATES OF AMERICA,
Plaintiff-A ppellee,
UNITED STATES OF AMERICA,
Counter-Defendant-A ppellee,
- against -
JOHNNY DACCARETT: FRANCISCO J. PALACIO:
CREACIONES IVONNE: SABMAR LTDA:
INDUSTRIAS MARATHON LIMITADA;:
COMERCIAL SAMORA LTDA; EMPRESA NELSON
GOMEZ, O. "FASTER": SIRACUSA TRADING CORP.:
HERIBERTO CASTRO MEZA and NELSON GOMEZ,
Claimants,
ca aia ia
A-76
MERRILL LYNCH BANK, Certain funds contained in
Account No. 044000804961700114433 held at The
MERRILL LYNCH BANK 1 Columbus; PIERCE,
FENNER & SMITH; MANUFACTURERS HANOVER
TRUST COMPANY; SOUTHEAST BANK & BANK OF
NEW YORK IN THE NAMES OF SIRACUSA
TRADING CORPORATION; HERIBERTO CASTRO-
MESA; JOSE SANTACRUZ-LONDONO, JAIME
VARGAS; HAROLD CASTRO; JAIRO OCAMPO; ANA
MILENA SANTA CRUZ; RIPON HOLDINGS;
MANUFACTURAS DE MODAS; CONFECCIONES
TIO: MANUFACTURAS. SAMIR LTDA;
MANUFACTURAS JOLIMER LTDA,
BARRANQUILLA INDUSTRIAL LTDA;
INDUSTRIAL MARATHON; INTERNATIONAL
EXCHANGE & INVESTMENT CORP., VALERY
FASHIONS LTDA.; COMERCIALIZADORA DE
SANTANDER LTDA; MANUFACTURAS DEL
ATLANTICO; CONFECCIONES ELIZABETH;
INDUSTRIAL DE CONFECCION LTDA.; BANCO
ATLANTICO AND ALL FUNDS TRANSFERRED TO
THROUGH AND OR BY MERRILL LYNCH, PIERCE
FENNER SMITH, INC. BANCO ATLANTICO
MANUFACTURERS HANOVER TRUST COMPANY,
SOUTHEAST BANK AND BANK OF NEW YORK ON
BEHALF OF OR FOR THE BENEFIT OF THE
AFORESAID CLAIMANTS TO ANY ALL BANKS IN
COLOMBIA AND ALL BANK ACCOUNTS THEREOF,
INCLUDING BUT NOT LIMITED TO BANCO DE
CALDAS ACCOUNT NUMBERS 0999306226 0331, 544-
A-77
7-1844 AND 544-710-844: BANCO DEL ESTADO
ACCOUNT NUMBER 8900033088; COMERCIAL
COSTENA DE CONFECCIONES LTDA; PRODUCTO
& TEXTILES COLOMBIANOS LTDA;
PRODUTEXCOL LTDA; GOMEZ NELSON and
COSTAFAST,
Defendants,
ABUCHAIBE HNOS.LTDA: MANUFACTURAS
INTERNACIONALES LTDA: ORGANIZACION J.D.
LTDA; MANUFACTURAS JD LTDA; COMERCIAL
SAMORA LTDA; CREACIONES VIVIANA LTDA:
COMERCIAL ESTRELLA LTDA; CONFECCIONES Y
TEJIDOS NACIONALES LTDA: MANUFACTURERA
DEL ATLANTICO LTDA; INDUSTRIAS MARATHON
LTDA; MANUFACTURERAS DE MODA LTDA;
INCOLCO LTDA; CREACIONES KAREN; TOTE
EXPORT MANUFACTURAS LTDA; CREACIONES
I'VONNE; CONFECCIONES ZUNY and VALERY
FASHIONS,
Delendants-A ppellants,
EMPRESA NELSON GOMEZ. O. "FASTER" and
COSTAFAST,
Counter-Claimants.
BEFORE:
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OAKES, PIERCE, and PRATT,
Circuit Judges.
Appeal in a civil forfeiture case from a judgment of
the United States District Court for the Eastern District of
New York, Jack B. Weinstein, Judge. denying motions for
judgment notwithstanding the verdict and for a new trial,
releasing amounts claimed by two claimants, and forfeiting
the funds claimed by all other claimants.
Affirmed.
ISIDORO RODRIGUEZ,
Barranquilla, Colombia S.A.,
for Defendants-Appellants
MONTGOMERY BLAIR
SIBLEY, Miami, FL (Davis,
Markel & Edwards, of
counsel), for Defendants-
Appellants ConfeccionesZ
Lida.. Manufacturas de
Valery Fashions Ltda.
Creaciones Karen, Tote
Export Manufacturas Ltda.
and Creaciones Ivonne.
ARTHUR P. HUI, Assistant
United States Attorney,
Brooklyn, NY (Mary Jo
White, United States Attorney
for the Eastern District of New
York, of Counsel), for
Appellee.
PRATT, Circuit Judge:
ee
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INTRODUCTION
Illegal sales ofcontrolled substances generate billions
of dollars in revenue every year. Narcotics traffickers
continually seek to make their illegal income appear legiti-
mate. When international drug conglomerates attempt to
move their profits beyond the reach of law enforcement
authorities, their monies are frequently funneled through
financial institutions in the United States. Money launder-
ing has become so sophisticated
that it is not unusual to find an intricate web
of domestic and foreign bank accounts, dum-
my corporations and other business entities
through which funds are moved, almost in-
stantaneously, by means of electronic fund
transfers.
House Committee on Banking, Finance and Urban Affairs,
H.R. Rep. No. 746, 99th Cong., 2d Sess. 16 (1986). The
arteries of international banking systems have become the
iene iinet
nee
A-81
"lifeblood" of the international drug trade. See 132 Cong.
Rec. $9938, $9986 (daily ed. July 31, 1986); President’s
Comm’n on Organized Crime, The Cash Connection:
Organized Crime, Financial Institutions. and Money
Laundering 4-8 (1984).
in an attempt to stop the flow of illicit money back
to drug suppliers, congress in the past decade has passed
several acts aimed at drug-trafficking and money-laundering
activities. See, e.g., International Narcotics Control Act of
1992, Pub. L. No. 102-583, 106 Stat. 4914, codified at 12
U.S.C. $§ 635, 22 U.S.C. §§ 2151, 2291: Money Laundering
Control Act of 1986, Pub. L. No. 99-570, 100 Stat. 3207,
codified at 18 U.S.C. §§ 1956, 1957. While a money-launder-
ing conviction results in automatic forfeiture to the govern-
ment of any property involved in the offense, see 18 U.S.C.
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§ 982(a), the government can also institute civil forfeiture
proceedings without first obtaining a conviction. See 18
U.S.C. §981. This case tests the effectiveness of civil forfei-
ture as a tool for seizing and forfeiting proceeds of narcotics
trafficking as they pass through our banking system.
FACTS AND BACKGROUND
There are two groups of claimants: the "Atlantico
Claimants", consisting of Manufacturas Internacionales
Ltda., Abuchaibe Hnos. Ltda., Comercial Samora Ltda.,
Creaciones Viviana Ltda., Comercial Estrella Ltda., Confec-
ciones y Tejidos Nacionales Ltda., Manufacturera del Atlan-
tico Lida., Manufacturas JD Ltda., Organizacion JD Ltda.,
and Industrias Marathon Ltda.; and the "Barranquilla
Claimants”, consisting of Confecciones Zuny Ltda., Manuf-
acturas de Modas Ltda., Incolco Ltda., Valery Fashions
A-83
Ltda., Creaciones Karen, Ltda., Tote Export Manufacturas
Ltda., and Creaciones Ivonne Ltda. Both sets of claimants
appeal from a final judgement and other rulings of the
United States District Court for the Eastern District of New
York, Jack B. Weinstein, Judge, following ajury verdict that
forfeited to the government more than $10,000,000, pursu-
ant to 18 U.S.C. §981 and 21 U.S.C. § 881. United States y.
All Funds on Deposit in Any Accounts Maintained at
Merrill. Lynch, Pierce, Fenner & Smith. 801 F. Supp. 984
(E.D.N.Y. 1992) (All Funds) (technical amendment to
Opinion filed on Sept. 14, 1992).
The forfeitures arose out of an international effort to
impede the drug-trafficking and money-laundering activities
of the Cali cartel, a Colombian conglomerate headed by Jose
Santacruz-Londono, which allegedly imports approximately
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3000 kilograms of cocaine a month into the United States.
Thecartel uses bank accounts throughout the United States,
Europe, and Central and South America to store and move
its narcotics proceeds. Its funds are moved through various
international banks by means of electronic funds transfers
(EFTs) for ultimate deposit into Colombian bank accounts.
When a customer wants to commence an EFT, its
bank sends a message to the transfer system’s central
computer, indicating the amount of money to be transferred,
the sending bank, the receiving bank, and the intended bene-
ficiary. The Central Computer then adjusts the account
balances of the sending and receiving banks and generates a
printout of a debit ticket at the sending bank and a credit
ticket at the receiving bank. After the receiving bank gets
the credit ticket, it notifies the beneficiary of the transfer. If
|
A-85
the originating bank and the destination bank belong to the
Same wire transfer system, then they are the only sending
and receiving banks, and the transfer can be completed in
one transaction. However, if the originating bank and the
destination bank are not members of the same wire transfer
system, which is often the case with international transfers,
it is necessary to transfer the funds by a series of transac-
tions through one or more intermediary banks.
The seizures at issue were precipitated by the arrests
of three Santacruz-Londono associates in Luxembourg on
June 28 and 29, 1990. These men had opened hundreds of
bank accounts throughout Europeand deposited large sums
of money in them for the Cali cartel. Anticipating that these
arrests would trigger an effort by the cartel to move its
monies to Colombia before they could be confiscated, Lux-
A-86
embourg law-enforcement authorities requested the assis-
tance of several countries to freeze monies related to the
cartel. During July and August 1990, a flurry of electronic
funds transfers from the suspect accounts ensued, resulting
in the seizure of $30 million in Europe, $16 million in
Panama, and $12 million in the United States.
The $12 million seized in the United States was the
aggregate of dozens of EFTs sent through New York City
intermediary banks that had correspondent banking rela-
tionships with Panamanian and Colombian banks, including
Banco Atlantico, Manufacturers Hanover, The Bank of
New York, and Merrill Lynch. After receiving the subject
EF Ts, the intermediary banks were supposed to credit the
accounts of designated correspondent Colombian banks; the
Colombian banks were then supposed to notify the benefi-
A-87
Ciaries that the funds were available. However, through
both oral orders and a series of eight arrest warrants in rem,
government agents instructed the intermediary banks in
New York to attach "all funds" on deposit in the names of
various individuals and entities connected with Santacruz-
Londono and "all related entities and individuals", and to
inform the agents about all transfers that were destined for
a third-party beneficiary in Colombia. The intermediary
banks complied with the agents’ directions; they initially
froze the seized funds and later transferred them to the clerk
of the court who now holds them pending the outcome of
this appeal.
Each successive warrant included more names. If the
government agents seized funds destined for a corporation
not yet named in the complaint, it would amend the com-
ee
A-88
plaint to add that corporation's name soon after the seizure.
By the seventh amended complaint and its accompanying
warrant, all but one of the claimants in this action were
explicitly named. The Drug Enforcement Agency ("DEA")
also subpoenaed from the intermediary banks financial
records of any accounts related to the entities named in the
complaint.
The ten Atlantico Claimants and seven Barranquilla
Claimants (collectively "claimants"), purportedly Colombian
clothing export companies, were the intended beneficiaries
of the seized EFTs. They filed claims to approximately $6.5
million of the seized funds, denied all of the allegations in
the in. rem complaint, and claimed that their monies had
been derived from legitimate sales of clothing. The Aulant-
ico Claimants also brought two counterclaims, seeking
A-89
damages for alleged violations of the fourth and fifth
amendments, of the Electronic Communications Privacy
Act, see 18 U.S.C. §§ 2510-2520 and §§ 2701-2710, of the
Right to Financial Privacy Act, see 12 U.S.C. $$ 3401-3422,
of the Federal Tort Claims Act, see 28 U.S.C. §§ 2671-2680,
and of the civil forfeiture Statutes, see 21 U.S.C. § 881: 18
U.S.C. § 981. Their counterclaims were dismissed before
trial.
In a related action, claimants sued the intermediary
banks in the United States District Court for the Eastern
District of New York, Jack B. Weinstein, Judge, for loss of
the use of their funds and violation of various federal and
State statutes. Judge Weinstein granted summary judgment
for the banks, holding that they could not be held liable for
following government orders respecting claimed government
A-90
funds. Manufacturas International, Lida vy. Manufacturers
Hanover Trust Co., 792 F.Supp. 180, 196(E.D.N.Y. 1992)
(Consolidated Bank Cases).
In still another related action, claimants sued the
United States attorneys who had ordered the banks to seize
the funds; Judge Weinstein dismissed that suit for failure to
staie a claim. Abuchaibe Hnos. v. Maliz, No. 92 Civ. 528
(E.D.N.Y. Mar. 11, 1992) (oral decision).
On May 13, 1991, after an ex parte, in camera
hearing, Magistrate Judge A. Simon Chrein found that the
government had shown in this civil forfeiture proceeding
probable cause "to believe that the defendant funds consti-
tute the proceeds of narcotics trafficking and/or money
laundering” under 21 U.S.C. §881(i) and 18 U.S.C. §981(g).
Two weeks later, Judge Weinstein held a three-day eviden-
|
A-91
liary hearing in which he also determined that there was
probable cause to believe the funds were forfeitable.
Claimants’ motion to vacate the probable-cause finding and
to suppress evidence obtained by the DEA subpoenas were
denied on February 19, 1992.
On March 9, 1992, a two-month jury trial began.
The government presented extensive evidence, including
corporate and banking records from all over the world and
the testimony of witnesses familiar with the Cali cartel’s
operations. That evidence linked Santacruz-Londono’s drug
proceeds to various Panamanian and Colombian shell
corporations. The claimants tried to show that the monies
were the legitimate profits from sales of clothing made in
Colombia and Panama. They claimed that massive ship-
ments of clothing were handed over to ship captains who
A-92
toured the Caribbean islands, trading some for produce,
livestock, and currency, losing some in transit, having some
stolen, and finally disposing of the remainder of the ship-
ments through charitable means. All Funds, 801 F. Supp.
at 992.
The jury found that eighteen of the twenty-two
amounts seized were forfeitable. For the remaining
amounts, the jury found that those claimed by
Manufacturas J.D. Ltda. and Organizacion J.D. Lida. were
not traceable proceeds of illegal money-laundering and
narcotics transactions, and that Confecciones Elizabeth
Ltda. was an innocent owner. After the tnal, those claim-
ants who received an adverse jury decision moved for
judgment notwithstanding the verdict and for a new trial;
both motions were denied. Judge Weinstein ordered the
A-93
release of the amounts found not to be forfeitable and stayed
execution of the forfeitures pending this appeal. Most of the
claimants have appealed. However, Siracusa Trading
Company, a claimant whose funds were seized from Merrill
Lynch’s office in Columbus, Ohio, and Confecciones
Elizabeth Ltda. theclaimant found to bean innocent owner,
did not appeal.
Comercial Samora, one of the Atlantico Claimants,
has also appealed, although it did not participate in the civil
forfeiture trial. On the first day of the trial, Comercial
Samora withdrew its verified claim and all other papers that
it had filed in the proceedings. Judge Weinstein conse-
quently entered a separate judgment of forfeiture on June 5,
1992, against the $124,000 originally claimed by Comercial
Samora; in his August 5, 1992, opinion, Comercial Samora
A-94
is noticeably absent from the list of claimants at trial. All
Funds, 801 F. Supp. at 992. Nevertheless, Comercial
Samora has appealed with the rest of the Atlantico Claim-
ants from the August 5, 1992, judgment; it did not file a
separate brief on appeal, and no separate arguments were
made on its behalf.
The claimants, including the two whose funds were
found not to be the proceeds of illegal drug trafficking, raise
numerous issues on appeal, challenging the validity of the
seizures and pleadings, various aspects of the trial, dismissal]
of the counterclaims, and the district court’s allowance of
the execution of an IRS levy. For the reasons stated below,
we affirm
DISCUSSION
The conceptual underpinnings of civil forfeiture can
ee
A-95
be traced back to ancient Roman and medieval English law,
both of which made objects used to violate the law subject
to forfeiture to the sovereign. See United States v. 785 St.
Nicholas Ave., 983 F. 2d 396, 401-02 (2d Cir.) (St. Nicholas
Aye.) (discussing historical origins of forfeiture), cert.
denied, 61 U.S.L.W. 3772 (1993). Our laws providing for
official seizure of property used ia criminal activity perpetu-
ate the legal fiction that "property used in violation of law
was itself the wrongdoer that must be held to account for the
harms it had caused." United States v. 92 Buena Vista
Avenue, 113 S. Ct. 1126, 1135 (1993) (Buena Vista Ave.).
Because the property, or res, is considered the wrongdoer, it
is regarded as the actual party to in rem forfeiture proceed-
ings. Id.
Civil forfeiture has recently gained new life as an
A-96
instrument of federal law enforcement, particularly as a
weapon in the "war on drugs”. As part of the Comprehen-
sive Drug Abuse Prevention and Control Act of 1970,
congress strengthened civil forfeiture as a means of confis-
cating illegal substances and the means by which they are
manufactured and distributed. Pub. L. No 91-513, 84 Stat.
1276 (1970), codified at 21 U.S.C. $§ 881-896. In 1978
congress amended the act to authorize the seizure and forfei-
ture of the proceeds of illegal drug transactions as well. The
statute provides for the forfeiture of "[a]ll moneys, negotia-
ble instruments, securities, or other things of value furnished
or intended to be furnished by any person in exchange for a
controlled substance [as well as] all proceeds traceable to
such an exchange.” Pub. L. No. 95-633, 92 Stat. 3777
(1978), codified at 21 U.S.C. § 881(a) (6) (emphasis added).
(aan
A-97
Now "one of the most potent weapons in the judicial
armamentarium", see United States v. 384-390 West
Broadway, 964 F. 2d 1244” 1248 (Ist Cir. 1992) (West
Broadway) (discussing widespread use of inrem proceedings
against drug offenders, civil forfeiture has become a favored
method for imposing significant economic sanctions against
narcotics traffickers. However, the ease with which the
government can seize property and the potential hardships
Caused to innocent owners who seek to recover their proper-
ly once the government has seized it have elicited concern
from courts and commentators alike. Given ‘that the reach
of civil forfeiture is constantly expanding to new realms-- in
this case, to electronic funds transfers between banks -- the
courts must ensure that constitutional and procedural
safeguards remain intact.
A-98
There are three ways the government can institute
civil forfeiture in. rem proceedings under 2] U.S.C. § 881.
First, it can follow the process set forth in the Supplemental
Rules for Certain Admiralty and Mantime Claims ("Supple-
mental Rules"). 21 U.S.C. §881(b). Second, it can obtain a
seizure warrant in the manner provided for in the Federal
Rules of Criminal Procedure, which requires a finding of
| probable cause ex parte by a judicial officer. Fed. R. Crim.
P.41(c). Third, it can seize property without judicial process
“when the Attorney General has probable cause to believe
the property is subject to civil forfeiture." 21 U.S.C. §
881(b)(4). See Si Nicholas Ave., 983 F. 2d at 402 (discuss-
ing three options), United States v. 4492 Livonia Rd. 889
F 2d 1258, 1262-63 (2d Cir. 1989) (Lavonia Rd.) (same). In
|
A-99
this case, the government used the first and third options,
neither of which requires pre-seizure judicial approval. See
and Tuscaloosa Counties, 941 F. 2d 1428, 1432 n.5 (11th
Cir. 1991).
Before analyzing the validity of the seizures here, we
note that even when the initial seizure is found to be illegal,
the seized property can still be forfeited. See United States
Y..$37,780 in United States Currency, 920 F.2d 159, 163 (2d
Cir. 1990) (holding that "illegal seizure of property does not
immunize that property from forfeiture"). This is because
seizure and forfeiture are two distinct events. While both
require the government to have probable cause, the conse-
quences of lack of probable cause may differ depending on
the event. Absence of probable cause at the time of the sei-
A-100
zure may result in the suppression of evidence in later
proceedings, but the defendant property itself cannot be
suppressed from the forfeiture action. See id. In contrast,
a failure to establish probable cause on the forfeiture issue
will preclude forfeiture of the property altogether. See
discussion Part B, infra
The seizures of at least nine of the EFTs followed the
process prescribed by the Supplemental Rules. Under the
Supplemental Rules, the government begins by filing a
verified complaint in the district where the seizure (arrest of
the property) will occur. Supp. Rule C(2). Ordinanly, the
court must review the papers authorizing an arrest warrant
in rem. See Supp. Rule C(3). However, in actions for
"forfeitures for federal statutory violations”, as in this case,
A-101
"the clerk, upon filing of the complaint, shall forthwith issue
4 summons and warrant for the arrest of the * * * property
without requiring a certification of exigent circumstances.”
Id. (emphasis added).
Claimants argue that the in rem complaints failed to
comply with the particularity requirements for pleadings set
forth in the Supplemental Rules. Two rules address the level
of particularity required in forfeiture complaints. Rule C(2)
States that the complaint "shall describe with reasonable
particularity the property that is the subject of the action.”
Rule E(2)(a) specifies that the complaint must "state the
circumstances from which the claim arises with such par-
ticularity that the defendant or claimant will be able,
without moving for a more definite Statement, to commence
an investigation of the facts and to frame a responsive
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pleading.”
These standards are more stringent than the general
pleading requirements set forth in the federal rules of civil
procedure, see Livonia Rd., 889 F.2d at 1266, an implicit
accommodation to the d. astic nature of the civil forfeiture
remedy. West Broadway, 964 F.2d at 1248: see also 12
Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure § 3242 (1973). The particularity-of-pleading
requirements in forfeiture cases provide a "way of ensuring
that the government does not seize and hold, for a substan-
tial period of time, property to which, in reality, it has no
legitimate claim." Livonia Rd. 889 F.2d at 1266 (quoting
United States v. Pole No. 3172. Hopkinton, 852 F.2d 636,
638 (Ist Cir. 1988)).
The complaint does not have to meet the ultimate
a
A-103
trial burden of showing probable cause for forfeiture; it
simply needs to establish a "reasonable belief that the
government can show probable cause for forfeiture at trial."
United S US.C inthe / $150.660-
00, 980 F.2d 1200, 1204-05 (8th Cir.1992)* In other words,
the complaint need not allege facts sufficient to show that
specific property is tainted, but facts sufficient to support a
reasonable belief that the government can demonstrate
probable cause for finding the property tainted. Id. at 1205:
see also United States v. One Parcel of Real Property, 921
F.2d 370, 376 (ist Cir. 1990): Pole No. 3172. Hopkinton,
852 F.2d at 640.
Claimants contend that the in. rem complaints did not
contain a particular description of the funds to be seized or
sufficient allegations to link the funds to illegal drug activity.
A-104
More specifically, they argue that the use of the phrase “all
related entities and individuals” in the complaint unduly
broadened the scope of the warrant and impermissibly gave
the government "full discretion” to seize whatever property
it desired
Whether a forfeiture complaint is sufficiently particu-
larized to reach a given piece of property is an issue of law
subject to plenary review West Broadway. 964 F.2d at
1248: U.S. Currency, in the Amount of $150,660.00, 95
F 2d at 1204. In determining whether a complaint satisfies
rule E(2)(a), a court may also consider supporting affidavits
that may cure a lack of particularity in the complaint itself.
Livonia Rd, 889 F.2d at 1266
If the complaint had described the subject properties
as simply “all funds on deposit in any accounts maintained
A-105
** * in the name [] of * * * Jose Santacruz-Londono" and
“all related entities and individuals", without more, then the
claimants’ argument might be well taken. However, given
that the names of the claimants were gradually added by the
successive amendments to the complaint, we will discuss in
this section here only those seizures that were preceded bya
complaint and arrest warrant that explicitly named the
intended beneficiary. All other seizures, that is, those made
before the complaint and arrest warrant specifically men-
tioned the EFT’s intended beneficiary, will be treated as
warrantless seizures, which are discussed in the next section.
This approach will obviate any dependence on the "related
parties” language in the warrant,
The successive complaints name as defendants "all
funds on deposit" in certain banks "in the names of "various
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named claimants, "including, but not limited to" specific
account numbers. The complaints allege that Santacruz-
Londono "caused substantial sums of monies” from narcot-
ics trafficking and money laundering to be transferred
through accounts, "including the defendant accounts”, and
credited to accounts, including those of various named
claimants. In addition, an international Letter Rogatory
from the Eastern District of New York is incorporated by
reference and attached to the complaint. It describes in
greater detail the government's investigation since 1979 of
Santacruz-Londono, the arrests of the three cartel members
in Luxembourg, and the use of Colombian shell corpora-
tions for disguising the illegal nature of the narcotics pro-
ceeds.
By naming both the intermediary banks through
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which the funds were to be transferred and the intended
beneficiaries of the EFTs, the complaint described the
subject property with "reasonable particularity". See Supp.
Rule C(2). By recounting Santacruz-Londono’s activities
and methods of funneling his narcotics proceeds through
various New York banks for ultimate deposit in Colombian
bank accounts, the complaint states "the circumstances from
which the claim arises" with sufficient particularity for the
claimants to "commence an investigation of the facts and
frame a responsive pleading". See Supp. Rule E(2).
In this case, the claimants filed verified claims and
responsive pleadings to the Seventh Amended Complaint in
tem without moving for a more definite Statement. We
conclude that the complaints and their accompanying
warrants of arrest complied with the pleading requirements
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of the Supplemental Rules.
2. Seizure without Judicial Process,
At least eleven of the amounts were seized either
without a warrant or prior to the issuance of a warrant that
explicitly named the intended beneficiary of the EFT. We
will analyze all such seizures as warrantless seizures. When
the "Attorney General has probable cause to believe" that
property is subject to forfeiture under $881, the government
is authorized to seize the property without judicial process.
2! U.S.C. $ 881 (b) (4).
Therefore, the question is whether the assistant
United States attorneys, as representatives of the Attorney
General, had "probable cause to believe" that the EFTs were
"subject to civil forfeiture under [§ 881]" at the time they
requested the intermediary banks to attach the subject
ne
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EFTs. Clearly they did. This is not a case in which the
government "stumbled" into a seizure without any prior
information about the subject property. See, e.g., $37,780 in
United States Currency, 920 F.2d at 163 (holding that DEA
agents at airport lacked probable cause to seize money from
claimant’s attache case at time of seizure). Instead, they
knew that Santacruz-Londono, who had already been
indicted in this country for various narcotics and money-
laundering violations, would probably be directing the
transfer of illicit income through particular New York banks
to the accounts of several of his "businesses" in Colombia.
There are two additional Statutory requirements for
seizures without judicial process. First, after seizure the
government must institute forfeiture proceedings "prompt-
ly". 21 U.S.C. § 881 (b). Second, the proceedings should
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follow applicable customs laws, 21 U.S.C. § 881 (d), which
are found at 19 U.S.C. §§ 1595a to 1615. In this case, the
government satisfied both requirements. It filed a civil
forfeiture complaint within days of each warrantless seizure,
and the resulting forfeiture proceeding followed the applica-
ble customs laws.
3. Fourth-Amendment Concerns.
Claimants argue that their fourth-amendment nghts
were violated in three instances: (1) when EFTs were seized
without a warrant; (2) when EFTs were seized pursuant to
arule C(3) warrant without a prior judicial determination of
probable cause; and (3) when the government gained access
to their financial records from the intermediary banks
without a warrant.
The Fourth amendment guarantees "[t]he right of the
A-111
people to be secure in their persons, houses, papers, and
effects, against unreasonable searches and seizures" and
provides that "no Warrants shall issue, but upon probable
cause, * * * and particularly describing the place to be
searched[ ] and the * * * things to be seized." U.S. Const.
amend. IV.
a. The Warrant Requirement
We first address the fourth amendment’s applicability
to warrantless seizures made pursuant to 21 U.S.C. § 881
(b)(4). While some circuits have held that the fourth amend-
ment’s warrant requirement is inapplicable in light of the
Statute’s plain language allowing seizure without judicial]
PFOCess, see, &.g., United States v. One 1977 Lincoln Mark
Y Coupe, 643 F.2d 154, 158 (3d Cir.) (only need probable
cause, not a warrant, because property subject to forfeiture
A-112
is contraband), cert. denied, 454 U.S. 818 (1981); United
States v. One 1978 Mercedes Benz, 711 F.2d 1297, 1302(Sth
Cir. 1983) (warrantless seizure of automobile pursuant to §
881 (b)(4) does not offend fourth amendment); United States
yv. Valdes, 876 F.2d 1554, 1557 (11th Cir. 1989) (warrantless
seizure of automobiles used to facilitate drug transaction did
not violate fourth amendment), this circuit requires seizures
made pursuant to § 881 (b)(4) to comport with the fourth
amendment, see, e.g., United States v. LaSanta, 978 F.2d
1300, 1304-05 (2nd. Cir. 1992) (warrantless seizure of vehicle
must meet a recognized exception to fourth amendment): ef.
I A oplication for W; tee 988 Chey
Monte Carlo, 861] F.2d 307, 311 (Ist Cir. 1988) (fourth
amendment applies to forfeiture seizures); United States vy.
Linn, 880 F.2d 209, 215 (9th Cir. 1989) (same).
A-113
Therefore, to be valid the warrantless seizures must
fall within one of the recognized exceptions to the fourth
amendment’s warrant requirement. LaSanta, 978 F.2d at
1305. The government argues that the exigent-circum-
stances exception justifies any warrantless seizures made in
this case. They claim that EFTs can be "completed in a
matter of minutes or hours", and therefore present "greater
exigencies than the seizure of a conveyance[ } or perhaps ]
any other kind of property". Because the property at issue
was fungible and capable of rapid motion due to modern
technology, we are satisfied that exigent circumstances were
present here. The seizures made pursuant to § 881 (b)(4),
therefore, did not violate the fourth amendment.
b. The Probable-Cause Requirement.
With respect to the EFT seizures that were made
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pursuant to an inrem warrant, claimants argue that because
the warrants were issued "forthwith" by a "clerk of the
court", without a preceding probable-cause determination,
see Supp. Rule C(3), they failed to satisfy the fourth amend-
ment’s probable-cause requirement. Several courts have
held the Supplemental Rules’ summary-warrant procedures
unconstitutional. See. eg.. United States vy. Life Ins Co.,
647 F. Supp. 732, 742(W.D.N.C. 1986) ("without a determi-
nation of probable cause by a qualified judicial officer, [$]
881(b) violates the Warrants clause of the Fourth
Amendment"); United States v. $128,035 in U.S. Currency,
628 F. Supp. 668, 672-73 (S.D. Ohio) ("procedure autho-
rized by §881(b) runs afoul of minimal Fourth Amendment
procedural requirements"), appeal dismissed, 806 F.2d 262
(6th Cir. 1986). Other courts have held that inrem warrants
|
A-115
are not true "warrants" subject to fourth-amendment
strictures. See, .g., United States v. TWP 17 R 4, 970 F.2d
984, 987-89 (Ist. Cir. 1992) (posting an in rem warrant on
property not a seizure for purposes of fourth amendment);
United States y. Turner, 933 F.2d 240, 245 (4th Cir. 1991)
(in_rem warrant more analogous ‘ a summons, not a
“warrant” within the meaning of fourth amendment).
In this circuit, just as warrantless seizures under § 88]
(b)(4) must satisfy the fourth amendment, so must seizures
made with warrants pursuant to the Supplemental Rules.
Therefore, although the plain language of §881(b) allows for
the issuance of a warrant without probable cause, see, e.g.,
One 1978 Mercedes Benz, 711 F.2d at 1302 ("If [Attorney
General] lacks probable cause * * * he may file a verified
complaint pursuant to the maritime rules and effect the
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seizure pursuant to that process"), the fourth amendment
mandates the existence of probable cause at the time of
seizure. $37,780 in LS. Currency, 920 F.2d at 163 (fourth
arnendment requires government to have probable cause at
the time it seizes money). However, the government need
not obtain a judicial determination of probable cause prior
to seizure. While "absent an ‘extraordinary situation’ a
party Cannot u:voke the power of the state to seize a
person's property without a pulor judicial determination that
the seizure is justified", the Supreme Court has held that
"such anextraordinary situation exists when the government
seizes items subject to forfeiture." United States v. Fight
Thousand Fight Hundred & Fifty Dollars, 461 U.S. 555, 562
n.12 (1983) (citing Calero-Toledo v. Pearson Yacht Leasing
Co., 416 U.S. 633 (1974)).
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Therefore, the government must have probable cause
at the time the clerk issues the warrant in. rem, but need not
demonstrate that it had probable cause at the tume of the sei-
zure unless a claimant challenges the validity of the seizure.
As discussed in section 2 above, the government had
probable cause to believe that the defendant f unds were the
proceeds of illegal narcotics trafficking at the time they were
seized.
- Pr I 1s in Financial R Is
Finally, claimants argue that the DEA’s subpoenas
ofall the financial records at the intermediary banks relating
to the EFTs violated their fourth-amendment rights. The
government contends that the claimants do not have any
protectable fourth-amendment interest in the bank records
at issue, because they are not customers of the intermediary
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banks. We agree. Claimants hold accounts with Colombian
banks, which have accounts with the intermediary banks.
The claimants’ relationship with the intermediary banks is
too remote to afford the claimants any legitimate expecta-
tion of privacy in information about EFTs being received by
the intermediary banks.
Even if claimants had their own accounts with the
intermediary banks, information regarding those accounts
would not be protected by the fourth amendment. In
United States v. Miller, 425 U.S. 435 (1976), the Supreme
Court held that a bank customer had no "protected Fourth
Amendment interest" in the copies of checks and other
records the bank retained. Id. at 440. The Court stated that
the fourth amendment "at the most guards against * * * too
much indefiniteness or breadth in the things required to be
J
A-119
"particularly described," if * * * the inquiry is one the
demanding agency is authorized by law to make and the
materials specified are relevant.” Id. at 445-46 (quoting
Oklahoma Press Pub. Co. vy. Walling, 327 U.S. 186, 208
(1946)).
The Court reinforced Miller in S.E.C. v. Jerry T.
O’Brien, Inc., 467 U.S. 735 ( 1984), where the Securities and
Exchange commission had subpoenaed an individual’s
financial records from two broker-dealer firms. The Court
held that the individual had no fourth-amendment claim,
because once he gave his financial information to someone
else, "even on the understanding that the communication
[wa]s confidential," he could not object if the third party
conveyed that information to law-enforcement authorities.
Jerry T. O’Brien, Inc., 467 U.S. at 743 (citing Miller, 425
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U.S. at 443). The Court also noted that a "target" of an
investigation has no right to notice of subpoenas issued to
third parties. Id. at 742-43.
Because the DEA was authorized to demand infor-
mation regarding the EFTs from the intermediary banks
and the materials requested were relevant to their investiga-
tion, we conclude that no fourth-amendment violation
occurred here
The Right to Financial Pnvacy Act ("RFPA")
prohibits "financial institutions” from giving the government
access to "the information contained in the financial records
of any customer" absent a search warrant, subpoena, court
order, formal written request, orcustomer authorization. 12
U.S.C. § 3402. Congress enacted the RFPA in part as a
A-121
response to Miller, 425 U.S. 435. See H.R. Rep. No. 1383,
95th Cong., 2d Sess. 34(1978), reprinted in 1978 U.S.C.C.A-
-N. 9273, 9306; see also United States v. Mann, 829 F.2d
849, 851 (9th Cir. 1987): Duncan vy. Belcher, 813 F.2d 1335,
1337 (4th Cir. 1987). However, the "most salient feature of
the Act is the narrow scope of the entitlements it creates”,
because congress wanted to “minimize[ ] the risk that
customers’ objections to subpoenas will delay or frustrate
agency investigations." Jerry T. O’Brien, Inc., 467 U.S. at
745-46,
If the government gains access to financial records
through a warrant, subpoena, court order, or written re-
quest, it must give the financial institution’s "customer"
simultaneous notice of the access. see 12 U.S.C. § 3405(2)
(administrative subpoena and summons); 12 U.S.C. §
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3406(b) (search warrant); 12 U.S.C. § 3407(2) (Judicial
subpoena); 12 U.S.C. §3408(4)(A) (formal written request).
In this case, however, the DEA’s subpoenas "for all financial
records" of "any and all accounts related to” the claimants
explicitly instructed the intermediary banks not to disclose
the existence of their requests.
The Barranquilla Claimants contend that since they
were not given notice of the government’s access to the fi-
nancial records, the evidence obtained from the subpoenas
should have been suppressed at trial. The Atlantico Claim-
ants argue that Judge Weinstein improperly dismissed their
counterclaim alleging that the government and the interme-
diary banks were liable under the RFPA for disclosing
information about the EFTs.
In response to both arguments, the government
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maintains that theclaimants are not protected by the RFPA,
because they are not "customers" of the intermediary banks.
Under the RFPA, a "customer" is "any person or authorized
representative of that person who utilized or is utilizing any
service of a financial institution * * * in relation to an
account maintained in the person’s name." 12 U.S.C. §
3401(5) (emphasis added). A "person" is defined as "an
individual ora partnership of five or fewer individuals." 12
U.S.C. § 3401(4). Thus, the act is limited to individual
Customers and small partnerships; corporations are not
protected. see, e.g, Pittsburgh National Bank y. United
Slates, 771 F.2d 73 (3d Cir. 1985); Spa Flying Service. Inc.
y. United States, 724 F.2d 95 (8th Cir. 1984) (per curiam):
sce also Jerry T. O’Brien, Inc., 467 US. at 745 (RFPA
“carefully limits the kinds of customers to whom it applies").
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The government notes that the claimants are all
corporations and therefore are not protected by the RFPA.
It is unclear from the record on appeal whether the claim-
ants are partnerships or corporations. If they are corpora-
lions, as they alleged in the district court, then they are not
protected by the RFPA. If they are partnerships, as they
now claim on appeal, we would need to remand so that the
district court could obtain proof to that effect; however, a
remand is not necessary, because there are alternate grounds
that preclude the application of the RFPA.
Even if the claimants are in fact small partnerships
rather than corporations, the government contends that they
still would not be protected by the RFPA, because they do
not hold accounts in their names at the banks as required by
12 U.S.C. § 3401(S). The funds were not seized from
aainieaaaiatniiaiiainiieaaieaiiaiaeid
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accounts held in the various claimants’ names, but were the
proceeds of wire transfers that were designated to be
credited to the accounts of Colombian banks maintained at
the intermediary banks.
In response, claimants argue that once the EFTs were
intercepted by the intermediary banks, the frozen funds were
held by those banks under the claimants’ names. At that
point, claimants contend, they had "accounts" in their names
at the banks. While claimants present a creative interpre-
tation of an "account", the seized funds were being held by
the banks until the forfeiture trial at the request of the
government, not the claimants. The RFPA is meant to
protect those who maintain accounts in their names at
financial institutions. Duncan, 813 F.2d at 1338 (definition
of customer turns on "whether the individual maintains the
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financial account in his or her name only"); Ridgeley v.
Merchants State Bank, 699 F. Supp. 100, 102 (N.D. Tex,
1988). Because the funds were being held in custody at the
banks pursuant to an arrest warrant, we conclude that the
claimants never maintained accounts in their names at the
intermediary banks
Finally, the government contends that even if there
had been astatutory violation of the RFPA, exclusion of the
financial records from trial would not have been a permissi-
ble remedy. Because the RFPA states that civil penalties are
"the only authorized" remedy for its violation, see 12 U.S.C.
5 3417(d), it would be inappropriate for the courts to imply
a suppression remedy as well. United States v. Frazin, 780
F.2d 1461, 1466 (9th Cir.) (only remedy under RFPA is pro-
vided in statute), cert. denied, 479 U.S. 844 (1986): see also
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United States v. Thompson, 936 F.2d 1249, 1252 (11th Cir.
1991) (courts should not imply a suppression remedy unless
Statute specifically refers to exclusionary rule), cert. denied,
112 S. Ct. 975 (1992).
In short on this point, because the RFPA does not
protect the claimants, the Atlantico Claimants’ counterclaim
was properly dismissed, and the financial records were
properly admitted at trial.
5.Authorization for DEA Subpoenas.
The Barranquilla Claimants also claim that the
financial records should have been suppressed at trial
because the DEA did not follow proper administrative
procedures for issuing the subpoenas. Specifically, they
argue that John Maltz, whose rubber-stamped signature is
on the subpoenas, did not have the authority to issue the
a
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subpoenas, and that even if he did, he failed to personally
determine whether the subpoenas were "relevant or materi-
al" to investigations conducted under the Comprehensive
Drug Abuse Prevention and Control Act of 1970, as re-
quired by 21 U.S.C. § 876 (a). See United States vy. Hossba-
ch, 518 F. Supp. 759, 765-66 (E.D. Pa. 1980).
Section 876 (a) authorizes the Attorney General to
issue subpoenas for "relevant or material” information; the
Attorney General may in turn delegate this subpoenas
power to any DEA officer or employee. See 21 U.S.C. §
878(a)(2); see also
Tel. Co.. 516 F. Supp. 225, 229 n.2(D. Wyo. 1981). The
relevant federal regulation authorizes, among others, all
Special Agents-in-Charge and Assistant Special Agents-in-
Charge to issue subpoenas. 28 C.F.R. § 0.104, App. to
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Subpart R, Sec. 4(a).
Maltz was the Associate Special Agent-in-Charge of
the New York Drug Enforcement Task Force, a position
not specifically included in the regulation’s list. The Barran-
quilla claimants argue that any subpoena issued by Maltz
was therefore unauthorized. As an Associate Special Agent-
in-Charge, however, Maltz supervises nine Assistant Special
Agents-in-Charge, agents who are specifically authorized to
issue subpoenas under the regulation. During Maltz’s eight
years as an Associate Special Agent-in-Charge, internal New
York Drug Enforcement Task Force procedures have
required all administrative subpoenas to bear his signature.
Since Maltz has the same authority as an Assistant Special
Agent-in-Charge, plus additional supervisory responsibili-
lies, we agree with Judge Weinstein that Maltz’s exercise of
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the subpoenas power was proper. See Hossbach, 518 F.
Supp. at 765-66 (upholding validity of subpoenas issued by
either agents-in-charge or acting agents-in-charge).
The Barranquilla Claimants further argue that Maltz
never "issued" the subpoenas because they simply bear his
rubber-stamped signature; nor is there any indication that
Maltz personally determined that the information sought
was "relevant or material" to an investigation. Judge
Weinstein called the DEA’s procedures in this respect "dan-
gerous” and recommended that the government review its
system for issuing DEA administrative subpoenas, but he
denied the claimants’ motion to suppress. We find no error
in his ruling. Nothing in the statute, regulations, orcase law
requires a handwritten, rather than a rubber-stamped,
signature on the subpoena. More significantly, even if the
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initial subpoenas were defective, the financial records at
issue would have been introduced at trial anyway, because
they were procured through other means as well. Both the
government and the claimants served the intermediary
banks with deposition and trial Subpoenas for the same
documents.
Claimants argue that the EFTs were protected under
the Electronic Communications Privacy Act of 1986 ("ECP-
A"), which amended Title III of the Omnibus Crime Control]
and Safe Streets Act of 1968, ofien called the wiretap act. 18
U.S.C. §§ 2510-20. The ECPA updated the wiretap act to
add prohibitions against the interception of "electronic
communications" to the already existing prohibitions against
interceptions of oral and wire communications. See 18
A-132
U.S.C. § 2510(12). The Barranquilla Claimants maintain
that the district court should have suppressed evidence of the
EFTs since they were seized in violation of the ECPA. The
Atlantico Claimants contend that the complaint should have
been dismissed because the in rem warrants did not satisfy
the ECPA, and that for the same reason the district court
erred in dismissing their counterclaim under the ECPA.
First, we must determine whether the ECPA is
applicable to this case. The statute is directed at regulating
surveillance activities. However, the ECPA’s legislative
history indicates that congress intended to protect "funds
transfers among financial institutions". S. Rep. No. 99-54],
99th Cong., 2d Sess. 8 (1986), reprinted in 1986 U.S.C.C.A.-
N. 3555, 3562. There are no cases that apply the ECPA to
an electronic funds transfer between banks or to a seizure of
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funds after the transfer is complete. For purposes of this
appeal, however, we assume that the ECPA may apply to
EFTs. Before considering the statute’s applicability to these
transfers, we first take up other issues raised by the district
court.
Judge Weinstein addressed the ECPA at length in
Consolidated Bank Cases, 792 F. Supp at 190-93, and
briefly in All Funds, 801 F. Supp. at 995-96. Relying on the
“relation-back" doctrine, see 18 U.S.C. § 981(b); 21 U.S.C
§ 881(h), he held that the ECPA was inapplicable because "in
forfeiture proceedings tainted property is considered
forfeited at the moment the legal act is committed." All
Funds, 801 F. Supp. at 995-96. Because ownership was
transferred instantly at the moment of criminality, he found
that the government "reasonably viewed the funds as its
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own" al the time of seizure. Id. at 996 (quoting Consolidai-
ed Bank Cases, 792 F. Supp. at 192).
However, since Judge Weinstein’s decision. the
Supreme Court has clarified the parameters of the relation-
back doctrine in United States vy. 92 Buena Vista Avenue.
113 S. Ct. 1126 (1993). There. the government initiated a
civil forfeiture proceeding against land allegedly purchased
with proceeds of illegal drug trafficking. Theclaimant, who
had purchased the land with money her friend had given to
her, maintained that she was an innocent owner because she
did not know the money was traceable to narcotics trans-
actions. The district court held that, under the relation-back
doctrine, title to the land vested in the government at the
moment the illegal drug transaction proceeds were used to
pay the purchase price. Therefore, because the claimant had
| aia
A-135
purchased the land after the acts giving rise to the forfeiture
had occurred, she had never owned the land.
The Supreme Court disagreed, holding that the
government could not "profit from the common-law doc-
trine of relation-back until it has obtained a judgment of
forfeiture.” Id. at 1137. Otherwise, it would be impossible
to launch an innocent-owner defense, which was specifically
provided for at 21 U.S.C § 881(a)(7). The relation-back
doctrine is one of "retroactive vesting of title that operates
only upon entry of the judicial order of forfeiture or con-
demnation." Id. at 1138 (Scalia, J., concurring).
[n light of Buena Vista. Judge Weinstein’s applica-
tion of the relation-back doctrine was incorrect. Because the
sovernment cannot contend that it owns the defendant
Properties until a judgment of forfeiture is entered against
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them, we must examine the ECPA’s applicability to the
EFTs.
The ECPA prohibits interceptions of electronic
communications, see 18 U.S.C. § 2511(1), but no "device"
was used to obtain the information as contemplated by the
ECPA. The statute defines "intercept" as
the aural or other acquisition of the contents
of any wire, electronic, or oral communica-
tion through the use of any electronic, me-
chanical. or other device.
18 U.S.C. §2510(4) (emphasis added). Liability under the
ECPA is therefore predicated on the use of a "device". See
United States v. Turk. 526 F.2d 654, 658 (Sth Cir.) (act
requires "contemporaneous acquisition of the commu-
nication through the use of the device"), cert. denied, 429
U.S. 823 (1976) Because the government did not use any
type of "device" to obtain the EFTs and information, no
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"interception" occurred.
The district court, therefore properly rejected all of
the claimants’ arguments under the ECPA.
Claimants argue that EFTs are not seizable proper-
lies for purposes of the civil forfeiture Statutes because they
are merely electronic communications. They claim that an
EFT is not a direct transfer of funds. but rather a series of
contractual obligations to pay. Furthermore, they define an
EFT as "an intangible property, which not only cannot be
stopped once transmitted, but the Intermediary Bank upon
accepting it cannot alter from the instructions contained
therein." Finally, they claim that only after a transmission
is complete and the communication is accepted and received
[ee
A-138
by the beneficiary does it become a seizable res.
Section 881 of Title 21 provides for the seizure of
"moneys, negotiable instruments, securities, or other things
of value * * * all proceeds traceable” to narcotics transac-
tions. 2] U.S.C. §881(6). Similarly, 18 U.S.C. §981(a)(1)(-
A) provides for the seizure of "any property, real or per-
sonal, involved in a transaction or attempted transaction *
* * or any property traceable to such property."
Theclaimants’ conception of the intermediary banks
as messengers who never hold the goods, but only pass the
word along, is inaccurate. On receipt of EFTs from the
ray
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. While
claimants would have us believe that modern technology
—————————
A-139
moved the funds from the Originating bank through the
intermediary bank to their ultimate destination without
Stopping, that was not the case. With each EFT at least two
separate transactions occurred: first, funds moved from the
Originating bank tothe intermediary bank: then the interme-
diary bank was to transfer the funds to the destination bank,
a correspondent bank in Colombia. While the two transac-
ions can occur almost instantaneously, sometimes they are
separated by several days. Each of the amounts at issue was
seized at the intermediary bank after the first transaction
had concluded and before the second had begun.
Our decision in United States y. Banco Cafetero
Panama made it clear that a bank credit is a seizable res.
797 F.2d 1154, 1158 (2d Cir. 1986) (bank credit is "clearly
‘traceable proceeds’ under the forfeiture statute") (Banco
A-140
Cafetero). We also held that moving "traceable proceeds”
from bank to bank would not insulate them from forfeiture.
"Since commingled assets, traceable to drug proceeds, are
forfeitable, the bank’s money remains vulnerable to forfei-
ture when the money is moved into its account at a second
bank or into a second bank's account ata third bank.” Id
at 1161; see also Joint Explanato:. % atement of Titles II
and III, Psychotropic Substances Act ef 1978, Pub. L. No.
95-633, reprinted in 1978 U.S.C.C.A.N. 9518, 9522 ("pro-
ceeds * * * involved in intervening legitimate transactions,
or otherwise changed in form * * * still * * * subject to for-
feiture” as long as "traceable connection to an legal
transaction in controlled substances exist{s]").
Therefore, an EFT while it takes the form of a bank
credit at an intermediary bank is clearly a seizable res under
A-14]
the forfeiture statutes.
B. — Probable Cause.
Unless a claimant Challenges the validity of the
seizure, as in a motion to suppress, the government is not
called upon to demonstrate probable cause until trial of the
forfeiture action, see $37,780 in United States Currency, 920
F.2d at 163 (applying Banco Cafetero, 797 F.2d at 1162), or
perhaps on a summary judgment motion. Although the
government succeeded in two pretrial probable-cause
hearings, one before Magistrate Judge Chrein and one
before Judge Weinstein, and in a full-blown jury trial,
claimants still contend that the government failed to meet its
burden of Proving probable cause.
Both for seizures made under in rem warrants and for
warrantless seizures under § 881, the government bears the
ee
A-142
initial burden of establishing probable cause for instituting
the forfeiture proceeding, see 2! U.S.C. §881(d) (incorporat-
ing customs procedures); 19 U.S.C. § 1615 (customs laws), |
that is, "probable cause to believe that the properties are the
fruits of legal drug activity". See United States vy. 228
916 F.2d 808, 811-12 (2d Cir. 1990) (Whites Hill). cert.
denied. 498 U.S. 1091 (1991)
Since 1986 our case law has consistently relied on
Banco Cafetero for the proposition that, to establish
probable cause, the government must have “reasonable
grounds” to believe the property is subject to forfeiture, and
that these grounds must rise above the level of "mere
suspicion". 797 F.2d at 1160. See, e.g., United States v.15
Black Ledge Drive, 897 F.2d 97, 101 (2d Cir. 1990) (Black
eternal
_————
A-143
Ledge Drive); Livonia Rd., 889 F.2d at 1267; United States
y. One 1986 Mercedes Benz, 846 F.2d 2, 4 (2d Cir. 1988) (per
curiam). However, we seem to have recently articulated ap-
parently inconsistent formulations of how far above "mere
suspicion” the probable-cause burden lies. While in United
States v. $31,990 in U.S. Currency, 982 F.2d 851, 854 (2d
Cir. 1993)(citation omitted), we stated that the "government
must have reasonable grounds to believe that ’a substantial
connection exists between the money to be forfeited and the
exchange of a controlled substance”, in St. Nicholas Ave.,
983 F.2d at 403, we said that "[t]here need not be a sub-
stantial connection between the drug activities and the
property in question, but only a nexus between them." We
therefore take this opportunity to resolve this apparent
contradiction.
en
A-144
As authority for the "substantial connection” stan-
dard, the $3 in LS -y decision quotes United
4
States v, United States Currency in the Amount of $228. 536-
00, 895 F.2d 908, 916 (2d Cir.), cert. denied, 495 U.S. 958
(1990), which in turn relies on Banco Cafetero, 797 F.2d at
1160. However, Banco Cafetero does not state that a
"substantial connection" must be shown. only that the
—_—— ~———
government must have "probable cause to connect the
property with narcotics activity". 797 F.2d at |] 160 (empha-
sis added)
Moreover, on several occasions we have specifically
declined to adopt a "substantial connection” standard See
United States vy. 38 Whalers Cove Due, 954 F.2d 29, 33(2d
Cir.) (Whalers Cove), cert. denied, 113 S. Ct. 55 (1992):
Livonia Rd., 889 F.2d at 1269; United States y. One 1974
ee
A-145
Cadillac Eldorado Sedan, 548 F.2d 421, 423 (2d Cir. 1977).
Our decisions in $31,990 in U.S. Currency, 982 F.2d 851,
and United States Currency in the Amount of $228,536.00,
895 F.2d 908, are the only second circuit cases to the
contrary. Examining the facts of those two cases, we note
that application of the lower "nexus" standard, rather than
the "substantial connection" standard, would not have
affected their results.
[In $31,990 in US. Currency, the government failed
to establish probable cause to forfeit money seized from the
trunk of acab. 982 F.2d at 854-56. The claimant, who had
been a cab fare they day before the seizure, said he had
inadvertently left his money in the cab. The government’s
evidence consisted of the large amount of cash seized, the
manner in which it was packaged, the cab driver’s story re-
A-146
garding who owned the money, parallels between the cab’s
itinerary and that of a drug courier, and the cab driver's
possession of half a gram of cocaine. Id. at 853-55. None of
the people involved had ever been linked to any criminal
activity. Not only did the government fail to show a
"substantial connection" between the claimant's property
and narcotics, we held that the evidence demonstrated "no
more than a suspicion" that the money was the proceeds of
drug trafficking. Id. at 856. It goes without Saying that evi-
dence failing to amount to more than "mere Suspicion" is
incapable of establishing a "nexus".
In United States Currency in the Amount of $228,53-
6.00, the evidence supporting probable cause included tape
recordings of numerous conversations implicating the
claimant in drug trafficking, tax records, and eyewitness
A-147
testimony detailing the ciaimant’s possession, processing,
and sales of large amounts of cocaine. 895 F.2d at 911.
Application of the "nexus" standard there would have had
no effect, since the government’s case satisfied the higher
“substantial connection" standard.
Under all these circumstances, we are satisfied that
the weight of authority in the second circuit indicates that
the government must demonstrate only a "nexus between the
seized property and illegal drug activity, not a "substantial
connection". See St. Nicholas Ave., 983 F.2d at 403; United
nlates v. One 1987 Jeep, 972 F.2d 472, 476 (2d Cir. 1992):
Whalers Cove, 954 F.2d at 33; United States v. One 1974
Cadillac, 575 F.2d 344, 345 (2d Cir. 1978) (per curiam); One
1974 Cadillac Eldorado Sedan, 548 F.2d at 423.
To show that nexus when the res is a bank account,
iii.
A-148
the government must establish that there is probable cause
to believe the funds represent proceeds traceable to drug
transactions, see St. Nicholas Ave., 983 F.2d at 403; it is not
required to link the monies to any one particular transac-
tion. See Livonia Rd., 889 F.2d at 1269 (citing Banco
Cafetero, 797 F.2d at 1160). The government mustestablish
"reasonable grounds", based on more than "mere suspicion",
that the funds are subject to forfeiture. Banco Cafetero, 797
F.2d at 1160; Livonia Rd, 889 F.2d at 1267. Curiously, this
standard of proof can be less stringent than the typical
"prima facie proof’. Banco Cafetero. 797 F.2d at 1160. A
finding of probable cause may be based on hearsay, even
hearsay from confidential informants. see Livonia Rd, 889
F.2d at 1267, or circumstantial evidence, see St. Nicholas
Aye, 983 F.2d at 405, particularly in cases involving bank
iscceaniienminneeiiniaiiaiaiaiteeidieneiiannuaiel
A-149
accounts, money, or other fungible assets. See id. ("only
proof demonstrating probable cause is likely to be circum-
stantial, revealing unexplained wealth in conjunction with
evidence of drug trafficking").
Claimants argue that the evidence presented here was
illegally seized and therefore provided an impermissible
basis for a finding of probable cause. As discussed above,
however, there is no basis for suppressing the evidence
derived from the seizures under either the fourth amendment
or federal statutes.
The machinery of our civii forfeiture laws permits the
government to seize property without probable cause,
institute a civil forfeiture proceeding, and then use civil
discovery as a means of accessing information necessary to
effect a forfeiture. Because the final probable-cause deter-
A-150
mination rests on information presented in the forfeiture
action, the risk to claimants of being deprived of their
property is extremely high. Despite this apparent unfair-
ness, the precedents of this court and the Supreme Court, as
well as the relevant statutes and rules, seem to require this
result. At this point in the development of forfeiture law,
any Change in the balance of this unique procedural system
must come either from the Supreme Court or from congress.
Claimants also assert that even if the evidence was
properly admitted at trial, the government failed to demon-
strate "reasonable grounds" for the forfeiture of their funds.
Under 21 U.S.C. § 881, probable-cause determinations are
"made by the trial court's exercise of its judgment in light of
all the circumstances.” St Nicholas Ave., 983 F.2d at 405.
The government's case included bank records from around
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the world; documents seized by the Colombian National
Police from Cali, Colombia; and testimony of former
members of the Cali Cartel, numerous DEA agents, a
Luxembourg police officer, a member of the Internal
Revenue Service’s criminal investigations division, a United
States customs official, and a certified public accountant
who reviewed the claimants’ business records.
While the claimants argue that the government failed
to submit evidence that the "sources" and "destinations" of
the seized funds were connected to narcotics activities, the
extensive evidence regarding the Santacruz-Londono
organization as a whole was more than sufficient to link the
defendant funds to illegal drug trafficking. Each one of the
claimants was linked to Santacruz-Londono through the
testimony of at least one witness. We hold that the district
ee
A-152
court properly determined that the government had met its
burden of establishing probable cause for the forfeitures.
C Shifting Bvideations Biesian
After the government has established probable cause,
the burden shifts to the claimant to "demonstrate by a
preponderance of the evidence that the factual predicates
necessary to show probable cause have not been met or to
show claimant["]s lack of knowledge or consent to drug
related activities." St. Nicholas Ave.. 983 F.2d at 403: see
Black Ledge Drive, 897 F.2d at 102; Livonia Rd., 889 F.2d
at 1267 ("claimant must prove either that the property was
not used unlawfully * * * or that the illegal use was without
the claimant’s knowledge or consent"); Banco Cafetero, 797
F.2d at 1160 (claimant bears "ultimate burden"). If the res
is a bank account, the claimant bears the burden of proving
EE
A-153
that the account does not contain proceeds traceable to drug
transactions, but rather represents legitimate funds. St.
Nicholas Ave., 983 F.2d at 403.
Not only does the burden shift to the Claimant
opposing forfeiture, but the claimant’s burden is heavier
than the government’s. While the government, to establish
a prima facie case for forfeiture, need only demonstrate
“reasonable grounds", the owner of the seized property must
prove that the defendant property is legitimate "by a
preponderance of the evidence", a more strin gent standard.
United States v. 303 W. 116th St., 901 F.2d 288, 291 (2d Cir.
1990).
Judge Weinstein observed that the structure of the
civil forfeiture statutes is "inherently unfair to claimants".
All Funds, 801 F. Supp. at 991. While we also might
A-154
question the wisdom of forcing the owner of the seized
property to prove the property is "innocent", rather than
making the government prove the property id "guilty", the
constitutionality of congress’s allocation of the burdens of
proof in forfeiture cases has been upheld. See Whites Hill
Road, 916 F.2d at 814. We therefore stress the need for
courts to ensure that what little due process is provided for
in the statutory scheme is preserved in practice. See Mary
M. Cheh,
Hastings L. Rev. 1325 (1991) (urging attention to civil law
due process implications ofcurrent forfeiture practices); See
also United States v.All Assets of Statewide Auto Parts, 971 |
F.2d 896, 905 (2d Cir. 1992) ("We continue to be enormous-
ia iataiatneremenmnieiited
A-155
ly troubled by the government's increasing and virtually
unchecked use of the civil forfeiture statutes and the disre-
gard for due process that is buried in those Statutes.").
As the jury’s verdict indicates, Manufacturas J.D.
Ltda. and Organizacion J.D. Ltda. successfully proved that
their monies were not connected to drug activity. In addi-
lion, the jury found that Confecciones Elizabeth was an
innocent owner. The remaining claimants were unable to
show by a preponderance of the evidence that their monies
were legitimate. Given that "the evidence of drug tainting
was overwhelming" and that the claimants presented
"implausible stories" and "inconsistent positions", see All
funds, 801 F. Supp. at 992, we find that the remaining
eighteen amounts were properly forfeited.
D. Other District Court Rulings.
A-156
During discovery, the Barranquilla claimants
requested admissions from the government regarding
numerous historical, social, and cultural aspects of Colom-
bia. Because Chief Magistrate Judge Chrein questioned the
relevance of these requests and felt they were frivolous, he
directed both parties to brief the issue of appropriate sanc-
tions for Barranquilla Claimants’ Counsel after the trial.
No sanctions were imposed during trial, and ultimately
Judge Weinstein denied the government’s post-trial motion
for sanctions.
On appeal, the Barranquilla Claimants assert that
their counsel was "chilled" during the trial by the threat of
possible sanctions in violation of their due process rights.
The record, however, reveals no evidence that counsel for
a
A-157
the Barranquilla Claimants was "chilled" in any way. Inthe
absence of prejudice to the Barranquilla Claimants from
Chief Magistrate Judge Chrein’s actions, we find no viola-
tion of their due process rights.
> eine Ei -Witness Testi
The Barranquilla Claimants claim that they were
prejudiced by DEA Agent Michaelis’s testimony on the
subject of money laundering, because it constituted surprise
expert testimony. Michaelis was listed on the government’s
witness list prior to trial, but not as an expert. When
Michaelis took the stand, Judge Weinstein qualified him as
an expert and allowed him to testify about Santacruz-
Londono’s overall money-laundering scheme and tech-
niques. The Barranquilla Claimants argue that they were
substantially prejudiced" by this unexpected expert testimo-
Under the Federal Rules of Evidence, expert wit-
nesses may testify if their "specialized knowledge will assist
the trier of fact to understand the evidence or to determine
a fact in issue." Fed. R. Evid. 702. Qualified DEA agents
who testify as fact witnesses may also give expert opinion
testimony about the methods of drug operations. See
United States vy. Campino, 890 F.2d 588, 593 (2d Cir. 1989),
cert. denied, 498 U.S. 866 (1990): United States v. Diaz, 878
F.2d 608, 617 (2d Cir.), cert. denied. 493 U.S. 993 (1989).
A decision to allow expert testimony is within the broad
discretion of the trial judge and "is to be sustained on appeal
unless manifestly erroneous." United States y. Brown, 776
F.2d 397, 400 (2d Cir. 1985), cert. denied, 475 U.S. 114]
(1986) (citation omitted). Furthermore, a district court's
i
A-159
decision to permit! a witness who was not listed in the
c
pretrial order to testify will be upheld absent a clear abuse of
discretion. Dunlap- McCuller v. Riese Org., 980 F.2d 153,
158 (2d Cir. 1992).
A district court judge must frequently make close
discretionary calls regarding the admission of evidence in
civil forfeiture proceedings. Indeed. the Supreme Court has
recently signalled its willingness, at least with respect to
expert testimony, to require more active supervision by the
district court. See Daubert v. Merrell Dow Pharmaceuticals,
Inc., 113 S. Ct. 2786, 2796-98 (1993). Because in civil
forfeiture proceedings the government is far more favored
by the rules than in virtually any other type of judicial
proceeding, we think district judges, when making evidentia-
ry decisions in these cases, should be mindful of the heavy
A-160
burden placed on claimants.
Agent Michaelis’s testimony included an account of
his investigation of Santacruz-Londono and his associates,
as well as opinions about their money-laundering activities.
Judge Weinstein’s determination that his testimony would
help the jury was neither "manifestly erroneous” nor a "clear
abuse of discretion". Especially in light of the jury instruc-
lions explaining that the government had not given Michael-
is’s expert testimony in writing to opposing counsel when
they should have, and that anexpert’s opinion should not be
substituted for the jury’s own conclusions, we conclude that
the claimants were not prejudiced by Agent Michaelis’s
testimony.
3 Denial of Motion for Jud ae ee
At the end of the trial, Judge Weinstein denied the
hi saneeneamnaiieniaeiteemiil
A-161
Atlantico Claimant’s motion for a judgement notwithstand-
ing the verdict. See Fed. R. Civ. P. 50(b). On appeal, the
Atlantico Claimant’s contend that the district court erred in
denying their motion, because the government presented no
evidence connecting their funds with narcotics activity.
We review the district court’s decision on a motion
for judgement notwithstanding the verdict de novo. Songy.
Ives Laboratories, 957 F.2d 1041, 1046 (2d Cir. 1992).
Therefore, we can disturb the jury’s verdict only if we can
say, "without considering either the credibility of witnesses
or the weight their testimony deserves, that the only conclu-
sion a reasonable factfinder could have reached” is one
favoring the Atlantico Claimants. Enezcomp, Inc. y,
McCorhill Publishing, Inc., 873 F.2d 536, 541 (2d Cir.
1989). In other words, there must be "‘such a complete
A-162
absence of evidence supporting the verdict that the jury's
findings could only have been the result of sheer surmise and
conjecture, or * * * such an overwhelming amount of
evidence in favor of the movant that reasonable and fair
minded men could not arrive at a verdict against him.”
Song, 957 F.2d at i046.
Given the overwhelming evidence linking the Atlant-
ico Claimants to drug trafficking and money laundering, the
district court properly denied their motion for judgement
notwithstanding the verdict.
On July 29, 1992. the IRS served a notice of Levy on
the clerk of the United States District Court for the South-
ern District of New York to surrender the funds that were
about to be released to Manufacturas J.D. Ltda. and
A-163
Organizacion J.D. Lida. The IRS asserted that these two
claimants were "nominees or alter egos" of Johnny Daccare-
it, a delinquent taxpayer who owed the IRS in excess of $3
million. Because Judge Weinstein’s judgment, dated August
5, 1992, directed the clerk to issue a check for those funds to
counsel for the Atiantico Claimants, the clerk requested
clarification from the court. At that point the government
moved to amend the judgement to direct the clerk to honor
the IRS levy. Instead of amending the judgement, Judge
Weinstein simply entered an order authorizing the clerk of
the court to comply with the levy -- which he did, on
September 9, 1992.
Manufacturas J.D. Lida. and Organizacion J.D.
Ltda. claim that Judge Weinstein erred in permitting
execution of the IRS levy because (1) the government failed
A-164
to show that it was issued in accordance with 26 U.S.C. §
7429(a), (2) the Anti-Injunctive Act prevents it, 26 U.S.C. §
7421; (3) Johnny Daccarett has no proprietary interest in
their businesses; and (4) the government was circumventing
the federal interpleader statute and the Federal Rules of
Civil Procedure.
In response, the government argues that the only
grounds for noncompliance with an IRS levy are that (1) the
entity served with the levy is neither "in possession of” nor
"obligated with respect to" the requested property, or (2) the
laxpayer's property is "subject to an attachment or execu-
tion under any judicial process." 26 U.S.C. $6332. Since the
validity of the levy and competing claims to the ownership
of the funds are not valid reasons for refusing to honor a
levy, the court properly directed the clerk to honor the IRS's
A-165
If Manufacturas J.D. Ltda. and Organizacion J.D.
Ltda. want to pursue their challenge the IRS claim, they
must bring a separate wrongful levy action. 26 U.S.C. §
7426.
CONCLUSION
As the use of civil forfeiture against the proceeds of
narcotics trafficking increases, it is important to remember
that the pertinent statutes are not legislated exceptions to the
fourth amendment. Given the relative ease with which the
Statutory scheme allows the government to seize suspect
properties, it is imperative for courts to analyze carefully the
forfeiture process in light of the fifth amendment’s due
process demands and the fourth amendment’s probable-
cause and warrant requirements. Having done so in this
ee
A-166
case, we conclude that the government carefully complied
with both its statutory and constitutional obligations.
Affirmed
A-167
UNITED STATES COURT OF APPEALS
For the Second Circuit
At a stated Term of the United States Court of
Appeals for the Second Circuit, held at the United States
Courthouse in the City of New York, on the sixth day of
October, one thousand nine hundred and ninety-three.
Present: HON. JAMES L. OAKES, Docket Nos.
HON. LAWRENCE W. PIERCE, 92-6229
HON. GEORGE C. PRATT, 92-6259
Circuit Judges
UNITED STATES OF AMERICA.
Plaintif¥-A ppellee,
UNITED STATES OF AMERICA,
Counter-Defendant-Appellee,
- against -
JOHNNY DACCARETT; FRANCISCO J. PALACIO;
CREACIONES IVONNE: SABMAR LTDA; INDUSTRI-
AS MARATHON LIMITADA: COMERCIAL SAMORA
LTDA; EMPRESA NELSON GOMEZ, O. "FASTER":
SIRACUSA TRADING CORP.:HERIBERTO CASTRO
MEZA and NELSON GOMEZ,
Claimants,
MERRILL LYNCH BANK, Certain funds contained in
Account No. 04400080496 17001 14433 held at The MERRI-
eae aii
A-168
LL LYNCH BANK | Columbus; PIERCE, FENNER &
SMITH; MANUFACTURERS HANOVER TRUST
COMPANY; SOUTHEAST BANK & BANK OF NEW
YORK IN THE NAMES OF SIRACUSA TRADING
CORPORATION; HERIBERTO CASTRO-MESA; JOSE
SANTACRUZ-LONDONO, JAIME VARGAS; HAR-
OLD CASTRO; JAIRO OCAMPO; ANA MILENA
SANTA CRUZ; RIPON HOLDINGS; MANUFACTUR-
AS DE MODAS; CONFECCIONES TIO; MANUFACT-
URAS SAMIR LTDA; MANUFACTURAS JOLIMER
LTDA; BARRANQUILLA INDUSTRIAL LTDA:
INDUSTRIAL MARATHON; INTERNATIONAL
EXCHANGE & INVESTMENT CORP.; VALERY
FASHIONS LTDA.; COMERCIALIZADORA DE
SANTANDERLTDA; MANUFACTURAS DELATLA-
NTICO; CONFECCIONES ELIZABETH; INDUSTRIAL
DE CONFECCION LTDA.; BANCO ATLANTICO AND
ALL FUNDS TRANSFERRED TO THROUGH AND
OR BY MERRILL LYNCH, PIERCE FENNER SMITH,
INC. BANCO ATLANTICO MANUFACTURERS
HANOVER TRUST COMPANY, SOUTHEAST BANK
AND BANK OF NEW YORK ON BEHALF OF OR
FOR THE BENEFIT OF THE AFORESAID CLAIM-
ANTS TO ANY ALL BANKS IN COLOMBIA AND
ALL BANK ACCOUNTS THEREOF, INCLUDING
BUT NOT LIMITED TO BANCO DE CALDAS AC.
COUNT NUMBERS 0999306226 0331, 544-7-1844 AND
544-710-844; BANCO DEL ESTADO ACCOUNT NUM-
BER 8900033088; COMERCIAL COSTENA DECONFE-
CCIONES LTDA; PRODUCTO & TEXTILES COLOMB-
A-169
[ANOS LTDA; PRODUTEXCOL LTDA; GOMEZ
NELSON and COSTAFAST,
Defendants,
ABUCHAIBE HNOS.LTDA: MANUFACTURAS
INTERNACIONALES LTDA; ORGANIZACION J.D.
LTDA; MANUFACTURAS JD LTDA; COMERCIAL
SAMORA LTDA; CREACIONES VIVIANA LTDA;
COMERCIAL ESTRELLA LTDA: CONFECCIONES Y
TEJIDOS NACIONALES LTDA: MANUFACTURERA
DEL ATLANTICO LTDA; INDUSTRIAS MARATHON
LTDA; MANUFACTURERAS DE MODA LTDA;
INCOLCO LTDA; CREACIONES KAREN; TOTE
EXPORT MANUFACTURAS LTDA: CREACIONES
IVONNE; CONFECCIONES ZUNY and VALERY
FASHIONS,
Defendants-A ppellants,
EMPRESA NELSON GOMEZ, O. "FASTER" and
COSTAFAST,
Counter-Claimants.
Petitions for rehearing having been filed herein by
Defendants-Appellants, Abuchaibe Hnos. Ltda, Manufactu-
ras Internacionales Ltda, Organizacion J.D. Ltda, Manufac-
turas JD Ltda, Comercial Samora, Ltda, Creaciones Viviana
Ltda, Comercial Estrella Ltda, Confecciones Y Tejidos
Nacionales Ltda, Manufacturera Del Atlantico Ltda,
Industrias Marathon Limitada, Manufacturas De Modas
OO
A-170
Ltda, Incolco Ltda, Creaciones Karen, Tote Export Manu-
facturas Ltda, Creaciones Ivonne, confecciones Zuny and
Valery Fashions,
Upon consideration by the panel thereof, it is
Ordered that said petitions be and it hereby are
DENIED.
FOR THE COURT
ELAINE B. GOLDSMITH,
Clerk
By: /s
Carolyn Clark Campbell
Chief Deputy Clerk
A-17]
CONSTITUTIONAL AND STATUTORY
PROVISIONS
Fourth Amendment - "The right of the people to be
secure in their persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not be violated,
and no Warrants shall issue, but upon probable cause,
supported by Oath or affirmation, and particularly describ-
ing the place to be searched, and the persons or things to be
seized."
Fifth Amendment -"No person shall... be deprived
of... property, without due process of law."
12.ULS.C, §3402 - no Government authority may
have access to or obtain copies of, or the information
contained in the financial records of any Customer from a
financial institution .. .
18 US.C. §981(a)(1) - Except as provided in para-
A-172
graph(2), the following property is subject to forfeiture to
the United States: .. . (C) Any property, real or personal,
which constitutes or is derived from proceeds traceable to a
vio9lation of section 215, 471, 472, 473, 474. 476, 477, 478,
479, 480, 481, 485, 486, 487, 488, 501, 502. 510. 542, 545,
656, 657, 842, 844, 1005, 1006, 1007, 1014, 1028. 1029, 1030,
1032, or 1344 of this title or a violation of section 1341] or
1343 of such title affecting a financial institution
18 USC. $98 1(d) - For purpose of this section. the
provisions of law relating to the seizure. Summary and
judicial forfeiture, condemnation of property for violation
of the customs laws, the disposition of such property or the
proceeds from the sale of this section, the remission or
mitigation of such forfeitures, and the compromise of claims
(19 U.S.C. 1602 et seq.), insofar as they are applicable and
iene
A-173
not inconsistent with the provisions of this section, shall
apply to seizures and forfeitures incurred, or alleged to have
been incurred, under this section, except that such duties as
are imposed upon the customs officer or any other person
with respect to the seizure and forfeiture of property under
the customs laws shall be performed with respect to seizures
and forfeitures of property under this subchapter by such
officers, agents, or other persons as may be authorized or
designated for that purpose by the Attorney General, the
secretary of the treasury, or the Postal Service as the case
may be. The attorney general shall have sole responsibility
for disposing of petition for remission or mitigation with
respect to property involved in a judicial forfeiture proceed-
ing.
18 U.S.C. §2518(9) - Thecontents ofany...electron-
A-174
ic communication intercepted pursuant to this chapter or
evidence derived therefrom shall not be received in evidence
or otherwise disclosed in any trial, hearing or other proceed-
ing in a Federal... court... unless each party . . . has been
furnished with a copy of the court order, and accompanying
application, under which the interception was authorized or
approved.
I8ULS.C $2703 - A governmental entity may require
the disclosure by a provider of electronic communications
service of the contents of an electronic communication . . .
Only pursuant to a warrant issued under the Federal Rules
of Criminal Procedure or equivalent State warrant.
12 USC. $1615 - In all suits or actions... . brought
for... forfeiture .. . the burden of proof shall lie upon such
claimant. .. . Provided That probable cause shall be first
A-175
shown for the institution of such suit or action. to be judged
of by the court....
21 ULS.C. § 881 (a) - The following property shall be
subject to forfeiture to the United States and no property
right shall exist in them: . . . (6) All moneys, negotiable
instruments, securities, or other things of value furnished or
intended to be furnished by any person in exchange for a
controlled substance in violation of this subchapter, all
proceeds traceable to such an exchange, and all moneys,
negotiable instruments, and securities used or intended to be
used to facilitate any violation of this subchapter, to the
extend of the interest of an owner, by reason of any act or
omission established by that owner to have been committed
or omitted without the knowledge or consent of that owner.
21LULS.C. § 881(d) - The provisions of law relating to
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the seizure, summary and judicial forfeiture, and condemna-
tion of property for violation of the customs laws, the
disposition of such sei or the proceeds from the sale
thereof; the remission or mitigation of such forfeitures; and
the compromise of claims shall apply to seizures and
forfeitures incurred, or alleged to have been incurred, under
any of the provision of this subchapter, insofar as applicable
and not inconsistent with the provisions hereof; except that
such duties as are imposed upon the customs officer or any
other person with respect to the seizure and forfeiture of
property under the customs laws shall be performed with
respect to seizures and forfeitures of property under this
subchapter by such officers, agents, or other persons as may
be authorized or designated for that purpose by the Attor-
ney General, except to the extent that such duties arise from
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seizures and forfeitures effected by any customs officer.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.