§940 Return of Seized Property, Equitable Relief
2nd Circuit upholds release of nonforfeitable funds prior to trial. (940) The government seized a bank’s interbank account which contained about $7 million. About $1.7 million was attributable to deposits of money orders which the government alleged were used by Colombian drug cartels to launder money through the interbank account. The district court rejected the government’s claim that the entire account was forfeitable, and ordered the government to return to the bank the funds that were not attributable to money orders. The 2nd Circuit upheld the release of funds prior to the forfeiture trial. There was no support for the government’s contention that it was entitled to retain the illegally seized funds until a forfeiture trial. Although it would be senseless to order the release of funds if the government could immediately commence a forfeiture proceeding and establish probable cause, there was no indication that it could. Marine Midland Bank v. U.S., 11 F.3d 1119 (2nd Cir. 1993).
2nd Circuit orders relief for improperly noticed forfeiture despite claimant’s delay. (940) Claimant’s property was civilly forfeited, but notice was improper because a registered letter sent to claimant was returned and because the government then published notice only once instead of the statutorily required three times. Nevertheless, the district court denied claimant’s request for civil equitable relief because claimant received actual notice of the forfeiture during his criminal trial but waited to seek equitable relief until after the statute of limitations had expired for initiating a proper forfeiture proceeding. The 2nd Circuit disagreed, ordering relief. The court also found irrelevant that the district court that sentenced claimant had taken into account the amount of the forfeiture in setting a reduced fine. U.S. v. Giovanelli, 998 F.2d 116 (2nd Cir. 1993).
2nd Circuit affirms dismissal of Rule 41(e) motion because administrative forfeiture had begun. (940) The 2nd Circuit affirmed the district court’s dismissal of claimant’s motion under Fed. R. Crim. P. 41(e) for the return of his seized property, since the federal government had begun administrative forfeiture proceedings. Once the federal government properly commences a civil forfeiture proceeding, it is the prerogative of the claimant to chose the forum of adjudication. A judicial action may be commenced by filing a claim and cost bond within a certain time period, or an administrative forfeiture occurs by default. Under all of these scenarios, the claimant is afforded the opportunity to test the legality of the seizure in the forfeiture proceeding. Consequently, once the administrative process has begun, the district court loses subject matter jurisdiction to adjudicate the matter in a Rule 41(e) motion. Here, the administrative forum afforded claimant the opportunity to raise all objections to the seizure. U.S. v. One 1987 Jeep Wrangler Automobile, 972 F.2d 472 (2nd Cir. 1992).
2nd Circuit says prisoner’s motion to return seized property is not mooted by government’s destroying or declaring it forfeit. (940) After defendant’s arrest, the government seized property from his apartment. Some of the property was later forfeited and some of it was destroyed. However, two years after the seizure, other property, including computer hardware and software, remained in the government’s possession. Defendant filed a motion seeking the return of his property, and the government was directed to show cause why the relief should not be granted. Thereafter, the government destroyed the software and the computer hardware was transferred to the DEA for administrative forfeiture. The government advised the court that all of defendant’s property that had not been forfeited, destroyed, or transferred to the DEA would be turned over to him. The district court ruled that this mooted the defendant’s motion. On appeal, the 2nd Circuit reversed, holding that the government’s “conspicuous evasion” of a court order did not divest the district court of jurisdiction. The court was ordered to determine whether damages were appropriate for the destroyed software, and to conduct a hearing on return of the hardware or damages if it was not returned. Soviero v. U.S., 967 F.2d 791 (2nd Cir. 1992).
5th Circuit holds defendant did not have adequate remedy in state forfeiture proceeding where FBI retained claimant’s money. (940) In May, claimant filed a Rule 41(e) motion for the return of money held by the FBI. In August, the FBI issued two checks to claimant for the total amount claimed. Louisiana seized these checks two months later, and in November, Louisiana claimed the checks in a forfeiture proceeding. The district court then dismissed claimant’s Rule 41(e) motion, holding that the Louisiana forfeiture proceeding represented an adequate remedy at law under which claimant could recover his property. The 5th Circuit rejected this conclusion. Louisiana never cashed the checks, which became void after one year. Thus, the FBI retained claimant’s money, and the Louisiana forfeiture proceeding would not help him get it back. Hunt v. Dept. of Justice, 2 F.3d 96 (5th Cir. 1993).
5th Circuit treats appeals from Rule 41(e) motions as civil appeals for timing of notice of appeal. (940) Defendant filed his notice of appeal from the district court’s denial of his Rule 41(e) motion after the 10-day limit for criminal appeals under Fed. R. App. P. 4(b), but before the 60-day limit for civil appeals under Fed. R. App. P. 4(a)(1). The 5th Circuit found the appeal timely, holding that all appeals from orders granting or denying Rule 41(e) motions will be treated as civil appeals. Rule 41(e) motions represent a means by which a criminal defendant can determine her rights in property, and are not a part of the trial and punishment process. Hunt v. Dept. of Justice, 2 F.3d 96 (5th Cir. 1993).
5th Circuit upholds denial of motion for return of property where government initiated forfeiture action. (940) Petitioner filed a motion pursuant to Fed. R. Civ. P. 41(e) for return of a helicopter seized by the government. The district court found that petitioner suffered irreparable injury from the government’s retention of the helicopter, but stated that if the government instituted forfeiture proceedings within 30 days, the motion for equitable relief would be denied. The government then initiated a forfeiture proceeding in the district court. The 5th Circuit affirmed that petitioner was not entitled to a Rule 41(e) order directing the government to return the helicopter, despite the irreparable harm caused by the continued deprivation of the helicopter. Actions seeking return of property are governed by equitable principles. Irreparable harm is only one of several factors the court should consider when deciding whether to exercise its discretion to return the property under Rule 41. Another factor is whether the petitioner has an adequate remedy at law. The district court properly concluded that the judicial forfeiture proceedings provided petitioner with an adequate remedy to demonstrate that it was entitled to the return of the helicopter. Industrias Cardoen, Ltda v. U.S., 983 F.2d 49 (5th Cir. 1993).
5th Circuit affirms that there was probable cause as to crime and forfeitability of property. (940) Defendant moved before trial for the return of approximately $75,000 in cash seized from him after he was arrested for attempting to purchase cocaine in a “reverse sting” operation. The district court referred the matter to a magistrate to conduct a hearing to determine probable cause as to both the commission of a narcotics offense and the forfeitability of the money. The 5th Circuit affirmed the magistrate’s determination that there was probable cause. Defendant had thousands of dollars in cash stored and packaged in exactly the same way, $20,000 of which he used to pay for the cocaine in the instant offense. He had no legitimate employment and admitted that he sold cocaine for years. The $42,000 seized from a warehouse was just over the amount defendant needed to complete the next phase of the drug deal he had discussed with the undercover agent. U.S. v. Ivy, 973 F.2d 1184 (5th Cir. 1992), abrogation on other grounds recognized by U.S. v. Fike, 82 F.3d 1315 (5th Cir. 1996).
5th Circuit refuses to intervene in administrative forfeiture process to compel return of non-pornographic materials. (940) After various pornographic materials were seized from defendant, defendant challenged the government’s failure to return certain other items of property including non-pornographic photographs of his children and family. The 5th Circuit refused to invoke its mandamus power to compel the district court to order the immediate return of those items. The government was in the process of administratively forfeiting the non-contraband materials, and the remaining property would be returned to defendant at the conclusion of that process. An intervention into the administrative process would be premature. U.S. v. Schmeltzer, 960 F.2d 405 (5th Cir. 1992).
7th Circuit holds that appeals from Rule 41(e) orders should be treated as civil for purposes of timing appeal. (940) The district court denied defendant’s motion under Fed. R. Crim. P. 41(e) for the return of seized evidence. Losing parties in criminal cases have only 10 days to appeal under Rule 4(b), while defendant took 25 days. The 7th Circuit found the appeal timely, ruling that appeals from orders granting or denying motions under Rule 41(e) should be treated as civil appeals. U.S. v. Taylor, 975 F.2d 402 (7th Cir. 1992).
7th Circuit refuses to return seized weapon to felon who failed to provide evidence of ownership. (940) More than a year after defendant’s conviction on armed robbery charges, the prosecutor filed a motion asking the court’s permission to destroy a gun defendant had in his possession when arrested. Defendant filed a demand for the return of the gun, which the district court treated as a motion for return of seized evidence under Fed. R. Crim. P. 41(e). The 7th Circuit affirmed the denial of the motion because defendant failed to present evidence that he owned the gun. Records showed its sale by a gun shop, and the buyer reported that he traded the gun to a person other than defendant. Defendant failed to present evidence of his ownership of the gun because he feared prosecution for being a felon in possession of a firearm. A party who asserts the privilege against self-incrimination must bear the consequence of a lack of evidence. U.S. v. Taylor, 975 F.2d 402 (7th Cir. 1992).
9th Circuit says government may not restrain substitute assets before conviction. (940) It is clear that upon conviction the government may seize substitute assets if the forfeitable assets are unavailable. But the 9th Circuit held that 18 U.S.C. §982(e) does not authorize the pretrial restraint of substitute assets. The court thus followed In re Assets of Martin, 1 F.3d 1351 (3rd Cir. 1993) and U.S. v. Floyd, 992 F.2d 498 (5th Cir. 1993), and disagreed with In re Billman, 915 F.2d 916 (4th Cir. 1990), cert. denied, 111 S.Ct. 2258 (1991), and U.S. v. Regan, 858 F.2d 115 (2nd Cir. 1988). Accordingly, the district court was ordered to vacate its order restraining substitute assets prior to trial. U.S. v. Ripinsky, 20 F.3d 359 (9th Cir. 1994).
9th Circuit reverses corporation’s conviction where asset seizure left it unable to obtain counsel. (940) Unimex, a corporation, was engaged in buying and selling foreign currency and operating a travel agency. An undercover investigation revealed it was also being used to launder money. All of its assets were seized, and it was convicted of money laundering, along with one of its officers. It was not represented by counsel at trial because a corporation is not entitled to appointed counsel. On appeal, the 9th Circuit reversed, holding that the court should have conducted a pre-seizure hearing to determine whether some of the assets of the corporation were legitimate. See U.S. v. Crozier, 777 F.2d 1376 (9th Cir. 1985). The court distinguished the Supreme Court’s opinion in Caplin & Drysdale v. U.S., 491 U.S. 617 (1989), on the ground that the defendants in that case had a right to appointed counsel. Here, the corporation was deprived of the ability to retain counsel without a prior hearing on whether the seizure was proper. U.S. v. Unimex, Inc., 991 F.2d 546 (9th Cir. 1993).
9th Circuit says U.S. cannot be ordered to return property, absent possession or cooperation in seizure. (940) Following defendant’s arrest on state charges, the Beverly Hills police obtained a search warrant for his hotel room, and found a firearm and ammunition as well as other items. The firearm and ammunition were turned over to the U.S. and defendant was convicted in federal court of being a felon in possession of a firearm. After his conviction, defendant filed a motion pursuant to Rule 41, Fed. R. Crim. P. for return of the other property seized by the Beverly Hills police. Judges Schroeder, Browning and Fletcher found no basis to conclude that the Beverly Hills police were acting as federal agents at the time of the search. Absent actual cooperation between federal and state law enforcement agencies in either obtaining the warrant or conducting the search itself, the federal government cannot be ordered to return property. The district court’s order to return the property was vacated. U.S. v. Huffhines, 986 F.2d 306 (9th Cir. 1993).
10th Circuit denies Rule 41(e) jurisdiction because judicial forfeiture action provided adequate remedy. (940) After claimants’ property was seized, they filed a motion under Fed. R. Crim. P. 41(e) for return of the illegally seized property. The 10th Circuit affirmed the district court’s refusal to exercise equitable jurisdiction, ruling that claimants had an adequate remedy at law in a judicial forfeiture action. At the time claimant’s Rule 41(e) hearing took place, a judicial forfeiture complaint had been filed, warrants for arrest of the property had been served, and notice of service of the complaint had been mailed. Thus, the claimants had an adequate remedy to challenge the seizure because the legality of a seizure may be tested in a judicial forfeiture proceeding. The fact that the court had extended the deadlines in the forfeiture proceeding did not alter the analysis. Frazee v. Internal Revenue Service, 947 F.2d 448 (10th Cir. 1991).