Appendix — Industrias Marathon Ltda. v. United States and Industrias Marathon Ltda. v. Manufacturers Hanover Trust Co.

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IN THE ©

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1993

INDUSTRIAS MARATHON LTDA.,

Petitioner,

UNITED STATES OF AMERICA

and

MANUFACTURERS HANOVER TRUST COMPANY,

Respondents.

Petition for Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

APPENDIX TO PETITION FOR

WRIT OF CERTIORARI

Isidoro Rodriguez

LAW OFFICES OF ISIDORO

RODRIGUEZ, PC.

Calle 84, No. 56-51

Second Floor, Suite 4

Barranquilla, Colombia

(O11) 5758-561678/458273

Counsel for Petitioner

LANTAGNE DUPLICATING SERVICES

801 fast Main Street Suite 100 Richmond, Virginia 23219 (800) 84743477

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TABLE OF CONTENTS

Opinion of the Honorable Judge Ja~k

B. Weinstein, District Court for the

Eastern District of New York, United

States v. All Funds, 801 F. Supp.

984 (August 5, 1992) ...... la

Opinion of the United States Court

of Appeals for the Second Circuit,

Merrill Lynch Bank, F. 2d. P

Docket No. 92-6229 (September 10,

1993) i 6s 2 6 @ ss lb

Order Denying Peition for Rehearing,

eee Os Sees bo a a a es ee es Ee

Opinion of the Honorable Judge Jack

B. Weinstein, in Manufacturas Inter-

national, Ltda. v. Manufacturers

Hanover Trust Co., and Consolidated

Cases, 792 F. Supp. 180 (February

27, 1992), appeal pending Docket No.

92-7360 "ted UAE Vue fae De ee ee oe ee ee ee

APPENDIX 4

Reported at: 801 F. Supp 984

(E.D.N.Y. 1992)

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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 11201

By Jennifer Boal

Gary Brown

Arthur Hui

For the Claimants:

Isidoro Rodriguez, Esq.

Calle 84 No. 56-51

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.

Miami, FL 3330

Attorney for 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

Michael Abbell, Esq.

Ristau & Abbell

4801 Massachusetts Ave. NW

Washington, DC 20016

Attorney for SIRACUSA TRADING CO.

HEIRS OF HERIBERTO CASTRO-MESA

TABLE OF CONTENTS

I.FACTS

II. LAW

III. APPLICATION OF LAW TO FACTS

A. MOTION FOR JUDGMENT

NOTWITHSTANDING THE VERDICT

1. INDUSTRIAS MARATHON LTDA

2. OTHER FORFEITED CLAIMS

3. MANUFACTURAS J.D. LTDA --

$98,991

ORGANIZACION J.D. LTDA --

$98,990 AND $98,800

CONFECCIONES ELIZABETH

LTDA - $40,000

B. MOTION FOR A NEW TRIAL

1. SHIFTING BURDEN OF PROOF

2. SEPARATE TRIALS

3. OMNIBUS CRIME CONTROL AND

SAFE STREETS ACT

4. NEW YORK BANKS

5. UNITED STATES ATTORNEYS

6 EXPERT TESTIMONY

7. BEST EVIDENCE RULE

C. MOTION TO RELEASE RES

1. FUGITIVE STATUS

2. "“DISENTITLEMENT" DOCTRINE

3 MOTION TO STAY JUDGMENT

AND WAIVE SUPERSEDEAS

BOND

IV. CONCLUSION

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 21 U.S.C §881 et seg

(1988 & Supp. III 1991), and 18 U.S.C. §

981 et 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 forfeitable. 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 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 Lendono organization utilized

many sophisticated strategies to launder

narcotics proceeds. Electronic funds

transfers from companies nominally in

the clothing manufacturing or import-

export business moved currency

internationally; 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 Pxrnama,

unloaded, and deposited in banks

accustomed to such practices; drug

dollars were exchanged on the black

market in Colombia for Colombian pesos;

shipments of manufactured goods from

Colombia to 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

Administration Financial Intelligence

Group, Cheryl Holmes, testified at trial

after reviewing the voluminous bank and

corporate records seized. She traced

the links between numerous 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

countries including the United States.

See generally Manufacturas International

Ltda v. Manufacturers Hanover Trust Bank,

et al. (Consolidated Bank Cases), __ F-

Supp. _, 1992 WL 96212 (E.D.N.Y. 1992)

(describing the wire transfers).

Officials of several European countries

began cooperating in 1989 investigating

10a

the suspected drug-money-laundering

activities of Jose Santa Cruz Londono.

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 that he

planned to set up _- several shell

companies to assist in the money-

laundering enterprises. The Suréteé

learned through wiretaps and faxtaps

that another Londono associate, Edgar

lla

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, and a

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.

Heavy wire transfer activity

followed the three arrests. Using

memoranda and bank records seized at the

time of the arrests, officials from

l2a

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 Panamar ..:> and

Colombian banks were instructea 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 United States

Attorney to attach the identified

l3a

accounts and wire transfers and pay the

money into court pending the outcome of

a plenary trial. In a separate action

by claimants against the banks which

seized the funds, summary judgment was

granted for the defendant banks. ee

Manufacturas International Ltda Vv.

Manufacturers Hanover Trust Bank, et al.

(Consolidated Bank Cases), __ 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 funds,

was dismissed for failure to state a

claim. Abuchaibe Hnos. v. Maltz 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

l4a

is common knowledge in the 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. See,

e.g., United

States v. $8,850 in United States

Currency, 461 U.S. 555, 565-66 (1983)

15a

(balancing test set out in speedy trial

context in Barker v. Wingo, 407 U.S.

514, 530 (1972), applies to determine

reasonableness of 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 aé_ 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

l6a

Handling Federal Narcotics Forfeiture

Cases, 79 Ill. B.J. 180 (1991)

(discussing forfeiture procedures).

The government brought these

proceedings under 21 U.S.C. § 881l(a) (6),

which provides for the forfeiture of

f[aJll 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 appiied 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." 21 U.S.C. § 881(d); United States

v. $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).

l7a

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 for the institution of such

suit or action, to be judged .. .- by

the court." To begin forfeiture

proceedings the government 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

18a

the evidence standard. United States v.

303 W 116th Street, N.Y., 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 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 Ltda Vv.

Manufacturers Hanover Trust Bank, et al.

19a

(Consolidated Bank Cases), __ F. Supp.

, 1992 WL 9212 (E.D.N.Y. 1992); United

States v. One Mercedes-Benz 380 SEL VIN

# WDBCA 33A1BB10331, 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 Cif.

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 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 v. 4492 S. Livonia Road,

20a

Livonia, N.Y., 889 F.2d 1258, 1267 (2d

Cait. 1989) (hearsay proper, since

holding otherwise would undermine

Congress’s intentional

shifting 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 probable cause on the

basis of hearsay affidavits.

United States v. 15 Black Ledge Drive,

Marlborough, Ct., 897 F.2d 97, 101 (2d

Cir. 1990). Circumstantial evidence may

be relied upon to show probable cause.

United States v. $2,500 in United States

Currency, 689 F.2d 10, 16 (2d Cir.

1982), cert. denied sub nom. Aponte v.

2la

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 1991.

Post-hearing motions to reconsider the

probable cause issue were denied. See

United States v. All Funds et al., _ 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.

19 U.S.C. § 1615. Standing is "a

threshold issue" for a claimant wishing

to contest forfeiture. United States v.

One 1982 Porsche 928, Three-Door,

License Plate 1986/NJ Temp/534807, 732

22a

F.Supp. 447, 451 (S.D.N.Y. 1990). rg

the claimant does not have standing,

"the court lacks jurisdiction to

consider his challenge of the

forfeiture." Id. A claimant need not

have actual or constructive ownership to

have standing; even a possessory

interest in the property is sufficient.

United States v. $37,590.00, 736 F.

Supp. 1272, 1276 (S.D.N.Y. 1990).

If a claimant has standing, it

bears the burden of proving by a

preponderance of the evidence either 1)

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 avoidance of positive

knowledge -- the source and nature of

the funds as drug-related (the innocent

23a

owner defense). United States v. 4492

S. Livonia Road, Livonia, N.Y., 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

of an 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 as

24a

corporate agents.

To satisfy its burden of proof the

claimant may not simply attack the

finding of probable cause. United

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). It has the “ultimate burden of

proving that the factual predicates for

forfeiture have not been met.” Banco

Cafetero, 797 F.2d at 1160. If the

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

25a

legitimate after the funds have already

been seized by the 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 surmourts all

hurdles and wins a jury verdict is

entitled to receive its money promptly.

In 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

27a

for the two years since the funds were

seized.

III. APPLICATION OF LAW TO FACTS

A. MOTION FOR JUDGMENT

NOTWITHSTANDING THE VERDICT

Under Rule 50(b) of the Federal

Rules of Civil 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 a conclusion 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

Sternbach & Co. v. 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 =,"

28a

1991 Adv. Committee Notes to Rule 50(b).

In the course of the two-month

trial in the instant case, the jury

conscientiously listened to the

evidence, 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 separately each claimant and

each claim inthe 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:

29a

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; 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 LMTDA,

$492,810; SIRACUSA 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

30a

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. 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 implausible stories told

by claimants’ witnesses would justify

the jury’s skeptical view of the

claimants’ somewhat inconsistent

positions.

The evidence of drug tainting was

3la

overwhelming. A flurry of wire transfer

activity followed the arrests of the

Londono associates Jurado, Garcia, and

Mahecha in Luxembourg. There was a

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 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

32a

appeared on one of the faxes intercepted

by the Luxembourg Surété Publique from

Jurado’s apartment in Luxembourg. The

account was at a 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-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

33a

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 the drug-related

sources of the funds.

2 OTHER FORFEITED CLAIMS

At the Luxembourg arrests several

pocket address books were seized.

34a

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 iegitimate

clothing manufacturing enterprise. The

evidence at trial conclusively

established that the corporate records

and bank statements revealed a pattern

of huge same day deposits and debits

reflective of drug money-laundering

35a

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 only by a number. Money

36a

was transferred from the Banco Cafetero

account to the claimants. Claimants

also received electronic funds transfers

from several of the identified shell

corporations set up by Londono’s

associates.

Claimants objecting to the verdicts

of forfeiture have made no showing that

the evidence “reasonably permits cnly a

conclusion in the[ir] 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. v. 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

37a

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

38a

transactions, claimant had met its

burden of proving that it was an

innocent owner. It did not "know,"

through its books and records’ or

corporate representatives and agents,

that the funds in question constituted

the traceable prcceeds of illegal drug

activity and drug money-laundering

transactions. The ,overnment 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 miscarriage of

justice. Under Rule 59(a) of the

Federal Rules of Civil Procedure, a

39a

court may grant a new trial if

the jury has reached a seriously

erroneous result, or . . . the

verdict is a “miscarriage of

justice” i.e. . . . the verdict is

against the great weight of the

evidence .

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

40a

remedy is necessary.

The Second Circuit in United States

v. Banco Cafetero Panama, 797 F.2d 1154

(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 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 will

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

4la

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.

Id.

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 States v. 228

Acres of Land and Dwelling Located

White Hill Road in Chester, Vt., 916

F.2d 808, 812 (2d Cir. 1990),

denied sub nom. Moreno v. United

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 ... ." ‘d. at 814;

United States v. $2,500 in United States

Currency, 689 F.2d 10, 12 (2d Cir. 1982)

42a

(same), cert. denied sub nom. Aponte v.

United States, 465 U.S. 1099 (1984);

United States v. $250,000 in United

States Currency, 808 F.2d 895, 901 (lst

Cir. 1987) (shifting burdens does not

violate fifth amendment); United States

v. 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, 2-Door Hardtop, 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

43a

been established."), cert. denied sub

nom. Bramble v. Saxbe, 419 U.S. 1069

(1974); see also United States vy.

Blackwood, 47 F.2d 849, 851-52 (lst

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.

ae SEPARATE TRIALS

Claimants argue that they were

prejudiced by the court’s refusal to

grant separate trials. The claimants

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

44a

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 Serv. Oil Co., 569 F.2d 716, 723

(2d Cir. 1977) (plaintiff allowed his

three challenges but defendant and

45a

third-party defendant required to

exercise one each and three jointly);

Carey v. Lykes Bros. S.Ss. Co., 455 F.2d

1192, 1194 (5th Cir. 1972) (district

court’s sharing procedure "expressly

authorized by Section 1870"); Moore v.

South African Marine Corp., 469 F.2d

280, 281 (5th Cir. 1972) (no error to

require shared challenges even where

party objects).

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 overlapped,

each claimant presented its own evidence

to meet its own burden of proving that

the funds it claimed were not the

46a

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

47a

need to instruct the jury on technical

financial matters. Denial of the motion

to sever in such circumstances is

proper. Cf. United States v. Marietta

Mfg. 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 v.

Advantage Enq’g, 732 F. Supp. 1163, 1170

(N.D. Ga. 1990); Keister v. Dow Chen.

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

48a

their calm attentiveness all belied

confusion or prejudice. A joint trial

was proper.

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 seq. (1988 &

Supp. III 1991), the federal wiretap

statute. The statute prohibits the

interception 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

49a

International Ltda _ v. 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 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 (llth 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 &

50a

Supp. III 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 title relates back

to date of crime), aff’d sub nom. United

States v. Schiferli, 895 F.2d 987 (4th

Cis. 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

i itieacaicameanaeiaai dinate

5la

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 the

claimants from taking depositions or

issuing subpoenas to employees of 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’

52a

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.

ia, et *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.

Where banks act as agents of the

court they are protected. Id.; cf. K/S

Norman Agather v. Sea Trade & Constr.,

Ltd., 767 F. Supp. 60, 62-63 (S.D.N.Y.

1991) (same where bank executes writ of

53a

attachment). Claimants require nothing

further from the employees of the bank.

The protective order was proper.

7 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 protective

Order. The magistrate judge determined

that the taking of Opposing counsel’s

deposition is permissible only where (1)

54a

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 v. 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. Maltz et al.,

CV 92-528 (oral decision).

55a

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.

56a

There was also testimony about’ the

existence 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

illegal 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 Ruis 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 testimony.

57a

The methods of moving of currency

internationally and the maintaining of

corporate and bank records are not

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 v.

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

58a

their limited testimony useful and non-

prejudicial.

Te BEST EVIDENCE RULE

Claimants’ argue that the

government’s expert 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

59a

application to the testimony of an

expert witness summarizing and analyzing

evidence already in the record. Cf. id.

Rule 1006. The objection is groundless.

C. MOTION TO RELEASE RES

Claimants Manufacturas J.p and

Organizacion J.D., which Sustained their

burden at trial of proving that 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.,

is a fugitive.

The government contends that Johnny

60a

Daccarett has a prior conviction for

trafficking in approximately two tons of

marijuana. There is also an outstanding

indictment against him in New Jersey for

tax violations. It is the government’s

position that since Daccarett is a

fugitive, the claimant corporations he

represents should be barred under the

disentitlement doctrine from receiving

funds they rightfully claim.

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.

If a 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,

6la

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”).

Le 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

showing that he fled to avoid

prosecution.

A person can be a fugitive 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

62a

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 v. 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 Located at Incline Village, 755

F. Supp. 308, 309 (D. Nev. 1990)

("whether [he] left before or after

- indictment is irrelevant"; nor need

63a

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,

€.g-, United States y. Eng, 951 F.2d

461, 464 (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 Vv. Pole No. 3172,

Hopkinton, 852 F.2d 636, 644 (lst 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, 1323-24 (9th Cir. 1978)

64a

(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 v. Real 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. 1359,

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 effort 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

65a

Daccarett. There was no legal barrier

to his return to the United States. He

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

66a

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 extended

this doctrine to bar a 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 v. $129,374

in United States Currency, 769 F.2d 583,

67a

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

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

68a

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 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

69a

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 v. United

States, 474 U.S. 1086 (1986); Schuster

v. United States, 765 F.2d 1047, 1049

(llth Cir. 1985) ('no question that the

Civil case ... ig related to the

criminal case"); United States vy.

$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 related forfeiture proceeding”)

(emphasis added). In this All Funds

case, the indictment at issue is in a4

70a

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.

It is 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 money-laundering

transactions. Daccarett’s status as a

fugitive is irrelevant. The motion to

release the res must be granted.

Jla

D. MOTION TO STAY JUDGMENT AND

WAIVE SUPERSEDEAS BOND

Claimants Abuchaibe Hnos.,

Comercial Estrella Ltda, Confecciones y

Tejidos Nacionales Ltda, Creaciones

Viviana Ltda, Industrias Marathon Ltda,

Manufacturas Internacionales Ltda, and

Manufacturera del Atlantico Ltda 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 will be no prejudice to

the government from a stay of execution

of judgment. Nor is there any risk that

the property will be removed:

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.

72a

»- « « 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.

United States v. $95,945.18 in United

States Currency, 913 F.2d 1106, 1109

(4th Cir. 1990); see also United States

v. One Lot of $25,721 in Currency, 938

F.2d 1417, 1419 (lst 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

Manufacturas J.D. and Organizacion J.D.

are ordered released in seven days from

73a

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, Industrias

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

74a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA

FINAL -

against- | JUDGMENT

AND

ALL FUNDS ON DEPOSIT IN ANY ORDER

ACCOUNTS MAINTAINED AT cv-90-

2510

MERRILL LYNCH, PIERCE, FENNER

& SMITH, ET AL.,

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 plain-

tiff UNITED STATES OF AMERICA presented

witnesses and documentary evidence; and

The jury considered the issues in

this action and, after 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 bur-

den 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:

75a

1. Claimant: CONFECCIONES ZUNY

LTDA

Amount: $440,000

2. Claimant: CREACIONES IVONNE

LTDA

Amount: $32,000

3. Claimant: CREACIONES KAREN LTDA

Amount: $756,625

4. Claimant: INCOLCO LTDA

Amount: $1,000,000 .

Claimant: MANUFACTURAS DE MODAS

-¥

LTDA

Amount: $400,000

6. Claimant: TOTE EXPORT MANUFAC

TURAS LTDA

Amount: $392,860

v< Claimant: VALERY FASHIONS LTDA

Amount: $448,418

8. Claimant: ABUCHAIBE HNOS.

Amount #1: $200,000

#2: $54,070

9. Claimant :COMERCIAL ESTRELLA

LTDA

Amount: $301,500

10. Claimant: CONFECCIONES y TEJI

DOS NACIONALES LTDA

Amount: $549,990

ll. Claimant :CREACIONEFS VIVIANA

LTDA

Amount #1: $125,025

#2: $50,033

#3: $50,000

12. Claimant: INDUSTRIAS MARATHON

LTDA

Amount: $805,194.49

13. Claimant: MANUFACTURAS INTERNA-

CIONALES LTDA

Amount: $599,970

76a

14. Claimant: MANUFACTURERA DEL

ATLANTICO LTDA

Amount: $492,810

15. Claimant: SIRACUSA TRADING Co.

and the HEIRS OF

HERIBERTO CASTRO-

MESA

Amount: $3,400,000; and

The jury rendered a unanimous ver-

dict on May 8, 1992 returning the sum of

$98,991 to claimant MANUFACTURAS J.D.

LTDA after deciding that the claimant

had 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 ver-

dict on May 8, 1992 returning the sums

of $98,990 and $98,800 to claimant ORGA-

NIZACION J.D. LTDA after deciding that

the claimant had met its burden of prov-

ing 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 ver-

dict on May 8, 1992 returning the sum of

$40,000 to claimant CONFECCIONES ELIZA-

BETH LTDA after deciding that the claim-

ant had met its burden of proving that

it was an innocent owner of the claimed

amount.

ORDERED AND ADJUDGED that the sum

of $10,098,495.49 plus all accrued in-

terest from the time of deposit with the

77a

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 ac-

crued interest from the time of deposit

with the court, less fees, be turned

over to the UNITED STATES OF AMERICA in

seven days and that the Clerk of the

Court issue a check in the total amount

payable to "United States Marshals Ser-

vice" 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 MANU-

FACTURAS 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, COLOMBIA.

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 pay-

able to "“Isidoro Rodriguez, Esq. as

Attorney for Organizacion J.D. Ltda” and

then forward that check to Isidoro Ro-

driguez, Esq., Calle 84 No. 56-51, Piso

78a

2, Office 4, Barranquilla, COLOMBIA.

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 CON-

FECCIONES 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.

Jack B. Weinstein

United States District Judge

Dated: Brooklyn, New York

August 5, 1992

APPENDIX pB

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-Appellee,

UNITED STATES OF AMERICA,

Counter-Defendant-Appellee,

- 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,

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 CAMPO; 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,

544-7-1844 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

IVONNE; CONFECCIONES ZUNY and VALERY

FASHIONS,

Defendants-Appellants,

EMPRESA NELSON GOMEZ,

O. "FASTER" and COSTAFAST,

Counter-Claimants.

BEFORE:

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~

MONTGOMERY BLAIR SIBLEY, Miami,FL

(Davis, Markel & Edwards, of counsel),

for Defendants-Appellants Confecciones

u a., M t das

tda. nc an ions

Ltda., Creaciones Karen, Tote Export

nufactura tda., 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

Appelle .

PRATT, Circuit Judge:

INTRODUCTION

Illegal sales of controlled sub-

stances generate billions of dollars in

revenue every year. Narcotics traffick

ers continually seek to make their ille-

gal income appear legitimate. 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 laundering has become so

sophisticated

that it is not unusual to find

an intricate web of domestic

and foreign bank accounts,

dummy corporations and other

business entities through

which funds are moved, almost

instantaneously, 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 "lifeblood" of the interna-

tional drug trade. See 132 Cong. Rec.

$9938, S9986 (daily ed. July 31, 1986);

President’s Comm’n on Organized Crime,

} lems _¢ teed Cri

dering 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-

laundering conviction results in auto-

matic forfeiture to the government of

any property involved in the offense,

see 18 U.S.C. § 982(a), the government

a |

can also institute civil forfeiture

proceedings without first obtaining a

conviction. See 18 U.S.c. $981. This

case tests the effectiveness of civil

forfeiture as a tool for seizing and

forfeiting proceeds of narcotics traf-

ficking as they pass through our banking

system.

FACTS AND BACKGROUND

There are two groups of claimants:

the "Atlantico Claimants", consisting of

Manufacturas Internacionales Ltda., Abu-

chaibe Hnos. Ltda., Comercial Samora

Ltda., Creaciones Viviana Ltda., Comer-

cial Estrella Ltda., Confecciones y

Tejidos Nacionales Ltda., Manufacturera

del Atlantico Ltda., Manufacturas JD

Ltda., Organizacion JD Ltda., and

Industrias Marathon Ltda.; and the "Ba

rranquilla Claimants", consisting of

Confecciones Zuny Ltda., Manufacturas de

Modas Ltda., Incolco Ltda., Valery Fash-

ions 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 a jury verdict that forfeited

to the government more than $10,000,000,

pursuant to 18 U.S.C. § 981 and 21

U.S.C. § 881. United States v. All

Funds on Deposit in Any Accounts Main-

tained 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 activi-

ties of the Cali cartel, a Colombian

conglomerate headed by Jose Santacruz-

Londofio, which allegedly imports approx-

imately 3000 kilograms of cocaine a

month into the United States. The cartel

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 re-

10b

ceiving bank, and the intended benefi-

Ciliary. The Central Computer then ad-

justs the account balances of the send-

ing and receiving banks and generates a

printout of a debit ticket at the send-

ing 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 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, ff the originating bank and the

destination bank are not members of the

same wire transfer system, which is

often the case with international trans-

fers, it is necessary to transfer the

funds by a series of transactions

llb

through one or more intermediary banks.

The seizures at issue were precip-

itated by the arrests of three Santa-

cruz-Londono associates in Luxembourg on

June 28 and 29, 1990. These men had

opened hundreds of bank accounts

throughout Europe and deposited large

sums of money in them for the Cali car-

tel. Anticipating that these arrests

would trigger an effort by the cartel to

move its monies to Colombia before they

could be confiscated, Luxembourg law-

enforcement authorities requested the

assistance 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

GSO SSS: ="

12b

in the United States.

The $ 12 million seized in the

United States was the aggregate of doz-

ens of EFTs sent through New York City

intermediary banks that had correspon-

dent banking relationships with Panama-

nian and Colombian banks, including

Banco Atlantico, Manufacturers Hanover,

The Bank of New York, and Merrill Lynch.

After receiving the subject EFTs, the

intermediary banks were supposed to

credit the accounts of designated corre-

spondent Colombian banks; the Colombian

banks were then supposed to notify the

beneficiaries that the funds were avail-

able. 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

13b

various individuals and entities con-

nected with Santacruz-Londofio and "all

related entities and individuals", and

beneficiary in Colombia. The intermedi-

ary 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 complaint to add that corpora-

tion’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

14b

named. The Drug Enforcement Agency

("DEA") also subpoenaed from the inter-

mediary banks financial records of any

accounts related to the entities named

in the complaint.

The ten Atlantico Claimants and

seven Barranquilla Claimants (collec-

tively "claimants"), purportedly Colom-

bian clothing export companies, were the

intended beneficiaries of the seized

EFTs. They filed claims to approximate-

ly $ 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 Atlantico Claim-

ants also brought two counterclaims,

seeking damages for alleged violations

of the fourth and fifth amendments, cf

the Electronic Communications Privacy

15b

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. §

SGlz; 18 U.S.C. $ 981. Their counter-

claims 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’ funds.

Manufacturas International, Ltda v.

16b

Manufacturers Hanover Trust Co., 792

F.Supp. 180, 196 (E.D.N.Y. 1992) (Con-

solidated Bank Cases).

In still another related action,

claimants sued the United States attor-

neys who had ordered the banks to seize

the funds; Judge Weinstein dismissed

that suit for failure to state a claim.

Abuchaibe Hnos. v. Maltz, No. 92 Civ.

528 (E.D.N.Y. Mar. 11, 1992) (oral deci-

sion).

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 pro-

ceeding probable cause "to believe that

the defendant funds constitute the pro-

ceeds of narcotics trafficking and/or

money laundering" under 21 U.S.C.

§881(i) and 18 U.S.C. § 98l(g). Two

17b

_—_———

weeks later, Judge Weinstein held a

three-day evidentiary hearing in which

he also determined that there was prob-

able cause to believe the funds were

forfeitable. Claimants’ motion to va-

cate 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 opera-

tions. That evidence linked Santacruz-

Londono’s drug proceeds to various Pana-

manian and Colombian shel] corporations.

The claimants tried to show that the

monies were the legitimate profits from

18b

sales of clothing made in Colombia and

Panama. They claimed that massive ship-

ments of clothing were handed over to

ship captains who toured the Caribbean

islands, trading some for produce, live-

stock, 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 forfeit-

able. For the remaining amounts, the

jury found that those claimed by Manu-

facturas J.D. Ltda. and Organizacion

J.D. Ltda. were not traceable proceeds

of illegal money-laundering and narcot-

ics transactions, and that Confecciones

Elizabeth Ltda. was an innocent owner.

After the trial, those claimants who

19b

received an adverse jury decision moved

for judgment notwithstanding the verdict

and for a new trial; both motions were

denied. Judge Weinstein ordered the

release of the amounts found not to be

forfeitable and stayed execution of the

forfeitures pending this appeal. Most

of the claimants have appealed. Howev-

er, Siracusa Trading Company, a claimant

whose funds were seized from Merrill

Lynch’s office in Columbus, Ohio, and

Confecciones Elizabeth Ltda. the claim-

ant found to be an 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 with-

drew its verified claim and all other

20b

papers that it had filed in the proceed-

ings. Judge Weinstein consequently

entered a separate judgment of forfei-

ture on June 5, 1992, against the

$124,000 originally claimed by Comercial

Samora; in his August 5, 1992, opinion,

Comercial Samora is noticeably absent

from the list of claimants at trial.

All Funds, 801 F. Supp. at 992. Never-

theless, Comercial Samora has appealed

with the rest of the Atlantico Claimants

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, chal-

lenging the validity of the seizures and

21b

pleadings, various aspects of the trial,

dismissal of the counterclaims, and the

district court’s allowance of the execu-

tion of an IRS levy. For the reasons

stated below, we affirm.

DISCUSSION

The conceptual underpinnings of

Civil forfeiture can be traced back to

ancient Roman and medieval English law,

both of which made objects used to vio-

late 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 Ave.) (discuss-

ing historical origins of forfeiture),

cert. denied, 61 U.S.L.W. 3772 (1993).

Our laws providing for official seizure

of property used in criminal activity

perpetuate the legal fiction that "prop

22b

erty used in violation of law was itself

the wrongdoer that must be held to ac-

count 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 proceedings. Id.

Civil forfeiture has_~ recently

gained new life as an instrument of

federal law enforcement, particularly as

a weapon in the “war on drugs”. As part

of the Comprehensive Drug Abuse Preven-

tion and Control Act of 1970, congress

strengthened civil forfeiture as a means

of confiscating 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.

23b

§§ 881-896. In 1978 congress amended

the act to authorize the seizure and

forfeiture of the proceeds of illegal

drug transactions as well. The statute

provides for the forfeiture of "{ajll

moneys, negotiable instruments, securi-

ties, or other things of value furnished

or intended to be furnished by any per-

son in exchange for a controlled sub-

stance [as well as] all proceeds trace-

able to such an exchange." Pub. L. No.

95-633, 92 Stat. 3777 (1978), codified

at 21 U.S.C. § 881l(a) (6) (emphasis

added).

Now "one of the most potent weapons

in the judicial armamentarium", see

———s

United States v. 384-390 West Broadway,

964 F. 2d 1244, 1248 (lst Cir. 1992)

(West Broadway) (discussing widespread

use of in rem proceedings against drug

AARON rn et

24b

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 property 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 safe-

guards remain intact.

A. Seizures.

Tnere are three ways the government

can institute civil forfeiture in rem

proceedings under 21 U.S.C. § 881.

25b

First, it can follow the Process set

forth in the Supplementa] Rules for Cer-

tain Admiralty and Maritime Claims

("Supplemental 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. Pp. 4l(c). Third, it can

seize property without judicia] process

"when the Attorney General has probable

Cause to believe the property is subject

to civil forfeiture. " 21 U.S.C. iS

881(b)(4). See St. Nicholas Ave., 983

F. 2d at 402 (discussing three Options);

United States y. 4492 S. Livonia Rd.,

ns S672 S. Livonia Rd.

889 F 2d 1258, 1262-63 (2d Cir. 1989)

(Livonia Rd.) (same). In this case, the

government used the first and third

26b

options, neither of which requires pre-

seizure judicial approval. See United

States v. Four Parcels of Real Property

in Greene and Tuscaloosa Counties, 941

F. 2d 1428, 1432 n.5 (llth 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 v.

$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 forfei-

ture"). This is because seizure and

forfeiture are two distinct events.

While both require the government to

have probable cause, the consequences of

lack of probable cause may differ de-

pending on the event. Absence of proba

27b

ble cause at the time of the seizure may

result in the suppression of evidence in

later proceedings, but the defendant

prgperty itself cannot be suppressed

from the forfeiture action. See id. In

contrast, a failure to establish proba-

ble cause on the forfeiture issue will

preclude forfeiture of the property

altogether. See discussion Part B, in-

fra.

ie Compliance with Supplemental

Rules.

The seizures of at least nine of

the EFTs followed the process prescribed

by the Supplemental Rules. Under the

Supplemental Rules, the government be-

gins by filing a verified complaint in

the district where the seizure (arrest

of the property) will occur. Supp. Rule

C(2). Ordinarily, the court must review

28b

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,

"the clerk, upon filing of the conm-

plaint, shall forthwith issue a summons

and warrant for the arrest of the * * *

property without requiring a certifica-

tion 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 particu-

larity required in forfeiture com-

plaints. Rule C(2) states that the

complaint "shall describe with reason-

able particularity the property that is

the subject of the action.” Rule

29b

E(2)(a) specifies that the complaint

must "state the circumstances from which

the claim arises with such particularity

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

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, and implicit accommodation to the

drastic nature of the Civil forfeiture

remedy. West Broadway, 964 F.2d at 1248;