§970 Property Forfeited
1st Circuit upholds fine designed to fill gap between value of forfeited assets and plea agreement amount. (970) In a plea agreement, defendant agreed to forfeit property with a total value of $2.8 million. In a separate agreement, he listed several assets to forfeit, including some condominiums owned by a corporation in which he had a 50 percent interest. The district court imposed a $634,000 fine, making it clear that its objective was to fill the gap between the value of the assets forfeited and $2.8 million plea agreement ceiling. The 1st Circuit affirmed, despite defendant’s dispute as to the valuation of certain forfeited assets and the government’s refusal to accept the listed condominiums for forfeiture. The court was not legally required to limit its fine to the size of the gap, and thus was not required to measure the gap precisely. The agreement provided that assets would satisfy the forfeiture obligation only if the assets were without any encumbrances. Defendant’s associate had filed a petition objecting to the forfeiture of the condos, claiming a 50 percent interest in them. The district court could properly construe this petition as an encumbrance. U.S. v. Maling, 988 F.2d 242 (1st Cir. 1993).
1st Circuit rejects forfeiture of property not specifically identified in government’s complaint. (970) The government’s forfeiture complaint described the defendant property as 384-390 West Broadway, but made no mention of an abutting parcel, known as 309 Athens St., which claimant purchased from a different seller. Over a year after a forfeiture order was entered against the Broadway property, the district court granted the government’s motion to expand the forfeiture order to include the Athens property. The 1st Circuit reversed, ruling that the government’s complaint did not describe the Athens property with sufficient particularity. The exacting particularity standard applicable to forfeiture actions is not merely a procedural technicality, but is a “significant legal rule designed to curb excesses of government power.” Here, the government’s complaint sought to forfeit the Broadway property and nothing more. The claimant was entitled to rely on what the complaint indicated. U.S. v. One Parcel of Real Property with the Building, Appurtenances, and Improvements Known as 384-390 West Broadway, 964 F.2d 1244 (1st Cir. 1992).
1st Circuit rules title dispute did not prohibit forfeiture of real property on which marijuana was grown. (970) The district court ordered summary judgment in favor of the government against property on which marijuana was grown. The 1st Circuit rejected claimant’s argument that summary judgment was improper because an unrelated party claimed title to a portion of the property. Claimant contended that this claim barred forfeiture since the marijuana crop may have been grown on land belonging to the third party. The 1st Circuit upheld the summary judgment, because defendant failed to present sufficient evidence to negate the property’s connection with the illegal activities. The government may treat as unitary, for purposes of an initial seizure warrant, any tract over which an owner or group of owners exercises dominion and treats as its own. Defendant failed to present sufficient evidence to negate the property’s connection with the illegal activities or to show that he was an innocent owner. U.S. v. One Parcel of Real Property with Buildings, Appurtenances, and Improvements, Known as Plat 20, 960 F.2d 200 (1st Cir. 1992).
2nd Circuit holds that funds being electronically transferred are seizable. (970) The government seized funds being electronically transferred (EFTs) by a Colombian drug cartel from United States banks to Colombian and Panamanian banks. Claimants argued that EFTs were not seizable properties under the civil forfeiture statute because they were merely electronic communications. They claimed that an EFT was not a direct transfer of funds, but rather a series of contractual obligations to pay, and that the intermediary banks were merely messengers who never held the funds. The 2nd Circuit rejected this characterization, and held that an EFT, when it takes the form of a bank credit at an intermediary bank, is clearly a seizable res under the forfeiture statutes. On receipt of EFTs from the originating banks, the intermediary banks possess the funds, in the form of bank credits, for some period of time before transferring them on to the destination banks. Under Circuit precedent, a bank credit is a seizable res. U.S. v. Daccarett, 6 F.3d 37 (2nd Cir. 1993).
2nd Circuit holds that government waived its right to a substitution of assets by entering letter agreement. (970) In lieu of a formal RICO forfeiture hearing, defendants entered into a letter agreement with the government in which they agreed to forfeit $22 million in cash in full satisfaction of the forfeiture penalties in 18 U.S.C. section 1963. To secure the payments, defendant delivered affidavits confessing judgment in the amount of $22 million. After defendant’s default, the government filed the confessions of judgment and moved for an Order of Forfeiture for the $22 million. The district court then granted the government’s motion under 18 U.S.C section 1963(m) for a substitution of assets, and entered a forfeiture order vesting in the government title to defendant’s interest in various corporations. The 2nd Circuit reversed, holding that by entering the letter agreement rather than submitting the forfeiture issue to the jury, the government waived its rights, including the right to a substitution of assets under section 1963(m). While the agreement contemplated the sale of the properties to raise the $22 million in the event of defendant’s default, it did not contemplate the automatic vesting of title to the properties in the government. U.S. v. Paccione, 948 F.2d 851 (2nd Cir. 1991).
3rd Circuit holds that 8th Amendment requires a criminal RICO forfeiture to be proportioned to the charged offense. (970) Based upon defendants’ RICO convictions, the district court ordered a forfeiture of 100 percent of defendants’ interest in a business which was primarily legitimate. The jury had found that one defendant’s interest in the corporation was tainted to the extent of 10 percent while the other defendant’s interest was tainted to the extent of five percent. The 3rd Circuit held that the 8th Amendment requires that a criminal RICO forfeiture order be justly proportioned to the charged offense. Some proportionality analysis is required when the defendant makes a prima facie showing that the forfeiture is grossly disproportionate, or bears no close relation to the seriousness of the crime. Here, defendants raised a prima facie claim of gross disproportionality, and thus the district court should have given the issue careful scrutiny. U.S. v. Sarbello, 985 F.2d 716 (3rd Cir. 1993).
4th Circuit holds that gambling statute authorized forfeiture of real estate. (970) Claimants challenged a forfeiture action against their residence under 18 U.S.C. §§ 981 and 1955(d) in connection with illegal gambling. The 4th Circuit held that 18 U.S.C. § 1955(d) authorizes the forfeiture of real estate. It provides for the forfeiture of “any property” used in an illegal gambling business. Every circuit court that has addressed this issue has concluded that section 1955(d) authorizes the forfeiture of real estate. U.S. v. Taylor, 13 F.3d 786 (4th Cir. 1994).
4th Circuit limits forfeiture based on parcel’s ability to shield crime on adjoining property from view. (970) The government sought to forfeit a parcel which helped shield from view defendant’s offloading of marijuana from a boat docked at an adjoining parcel. Only by traveling a dirt path across the target parcel could one drive from a public street to the parcel on which the drug activity took place. The 4th Circuit concluded that the parcel was not forfeitable. It distinguished an earlier case in which a dentist’s office was forfeited because the dentist wrote unlawful prescriptions there. While the dentist’s unlawful activity would be more difficult to detect because of its similarity to the kind of legal activity one would expect at a dentist’s office, a “natural object’s inherent, irrepressible ability to conceal whatever lies behind it from the view of persons on the other side” is a different matter. The court noted, however, that a different result might be called for if a person with knowledge of the drug activity had possessed a legal interest in the property at the time of the wrongdoing. U.S. v. Two Tracts of Real Property with Buildings, Appurtenances and Improvements Thereto, Located in Carteret County, 998 F.2d 204 (4th Cir. 1993).
5th Circuit says funds forfeited need not be traced to specific RICO violation. (970) Defendants were convicted of RICO charges stemming from a scheme to defraud banks through fraudulent real estate loans. Defendants were assessed $40 million and $38 million forfeiture penalties based on amounts received by them, their companies and family members. Defendants argued they should not be forced to forfeit amounts that went to their families and companies. The 5th Circuit affirmed the forfeiture orders, finding sufficient evidence that defendants “acquired or maintained” the amount forfeited. Contrary to defendants’ suggestion, the amounts subject to forfeiture need not be directly linked or traced to the specific acts proved. Forfeiture should reflect the scope of the offense. Here, sufficient evidence was offered as to the profits earned by defendants to support the forfeiture order. U.S. v. Faulkner, 17 F.3d 745 (5th Cir. 1994).
5th Circuit says court improperly limited scope of property forfeitable under 18 U.S.C. § 1467. (970) Under 18 U.S.C. § 1467(a)(3), a person convicted of certain offenses involving obscene materials forfeits their interest in any property used or intended to be used to commit or promote the commission of the offense. The 5th Circuit found that the district court improperly construed section 1467 to authorize forfeiture only of property actually used in the offense. The court’s discretion is much broader, and includes both property used or intended to be used. The district court also improperly narrowed the scope of section 1467(a)(3) to include only property used to produce or transport obscene articles. This improper construction led the court to improperly refuse consideration of certain evidence — FBI summaries of 72 unindicted videotapes, and 369 videos in defendants’ inventory which had been found obscene in unrelated state prosecutions. U.S. v. Investment Enterprises, 10 F.3d 263 (5th Cir. 1993).
5th Circuit rules §853 does not permit pretrial restraint of substitute assets. (970) The 5th Circuit held that 21 U.S.C. section 853(e) does not authorize the pretrial restraint of substitute assets. It permits a restraining order only against property described in section 853(a), and that section does not include substitute assets. Section 853(p) allows the forfeiture of substitute property if the property in subsection (a) is unavailable for certain reasons. U.S. v. Floyd, 992 F.2d 498 (5th Cir. 1993).
6th Circuit upholds forfeiture of modified descramblers under Electronic Communications Privacy Act. (970) Claimants modified otherwise legal descramblers to enable purchasers to receive premium pay satellite television channels without paying a fee to the programmers. The 6th Circuit held that the modified descramblers were forfeitable under the Electronic Communications Privacy Act. The Act prohibits the intentional interception of electronic communications. The court found that this included the modification of descramblers to allow unauthorized viewing of scrambled satellite television. Since claimant was subject to criminal prosecution under the statute, the defendant res was subject to forfeiture under 18 U.S.C. section 2513. U.S. v. One Macom Video Cipher II, 985 F.2d 258 (6th Cir. 1993).
6th Circuit says innocent spouse is entitled to entire property held as tenant by the entirety and awarded in divorce. (970) Claimant, an innocent owner, and her husband, owned as tenants by the entirety a house which was the subject of a forfeiture action. In U.S. v. Certain Real Property, 910 F.2d 343 (6th Cir. 1990), the 6th Circuit held that the government was precluded from obtaining the husband’s interest in the property unless claimant predeceased her husband or the entireties estate was otherwise terminated by divorce or joint conveyance. Unbeknownst to the district or appellate court, claimant and her husband were engaged in divorce proceedings, and prior to the original appeal, the divorce became final. The divorce court awarded claimant the entire house. The 6th Circuit affirmed the district court’s determination that claimant owned the property free and clear of any interest by her ex-husband or the government. The federal forfeiture laws do not operate to destroy the fundamental characteristics given to real property by the states. The government could not step into the husband’s place as a tenant by the entirety because the unities of time, title and person would be violated. However, the case was remanded for the district court to determine whether the state divorce court had all the facts before it in making its determination. Judge Krupansky concurred. U.S. v. Certain Real Property Located at 2525 Leroy Lane, West Bloomfield, Michigan, 972 F.2d 136 (6th Cir. 1992).
6th Circuit addresses forfeiture of property that facilitates marijuana growing on adjacent property. (970) Defendant owned four contiguous tracts of property. He grew marijuana on one of the tracts. The 6th Circuit permitted forfeiture of an adjacent tract because the corn field that hid the marijuana extended to the adjacent tract. However, it rejected the government’s argument that the tract on which a residence was located should be forfeited because defendant “used the residence to guard the marijuana and to conceal the entire operation by making the farm appear to be a legitimate use of the land.” The record contained no evidence that defendant had actually used the residence to guard the marijuana, and the court found no error in the district court’s conclusion that the mere presence of a residence did not sufficiently “facilitate” the offense to permit forfeiture. U.S. v. Smith, 966 F.2d 1045 (6th Cir. 1992).
6th Circuit defines forfeitable “property” by reference to recorded instruments, state law. (970) Defendant used his farm to grow marijuana. Though defendant’s interest in the farm was created by four deeds covering four separate tracts, the government argued that the entire farm should be considered a single piece of “property” subject to criminal forfeiture under 21 U.S.C. section 853(a)(2) if any part of the farm was used to facilitate drug activity. Following 4th Circuit cases on civil forfeiture, the 6th Circuit disagreed with the government’s contention, looking to the four separate deeds creating defendant’s interests to define what constituted a single piece of “property.” Relying on state law about when an interest is created, the court declared irrelevant that defendant’s ex-wife had conveyed her interest in the four tracts in a single quitclaim deed. Judge Guy dissented on this issue. U.S. v. Smith, 966 F.2d 1045 (6th Cir. 1992).
7th Circuit finds forfeitable interest in property on date of drug sale despite land contract. (970) In 1982, defendant, as vendor, entered into a contract to sell his property. The final payment was due five years later. Defendant remained on the property and leased it back from the buyer, and paid all taxes and insurance. The contract was not recorded. During 1988, defendant sold cocaine from the property to an undercover agent. Defendant and the buyer later purported to transfer title to the property back to defendant. Defendant argued that at the time of the drug sale, he was only a lessee. The 7th Circuit concluded that under Wisconsin law, defendant held a forfeitable ownership interest in the property under 18 U.S.C. § 853. The district court properly found that the land contract was not standard, and thus the doctrine of equitable conversion (under which the vendee of property under a land sale contract becomes the equitable owner of the property) did not apply. In addition, defendant acted as if he retained ownership of the property after entering into the contract, obtaining loans from three different banks using the property as collateral, and representing that he alone owned it. U.S. v. Ben-Hur, 20 F.3d 313 (7th Cir. 1994).
7th Circuit approves forfeiture of vehicle driven to and from meeting with proposed drug courier. (970) Claimant met with an undercover agent to pay him $10,000 to act as a courier and transport heroin from the Philippines to Chicago. The 7th Circuit reversed the district court’s determination that the vehicle claimant drove to and from the meeting with the “courier” could not be forfeited under 21 U.S.C. § 881(a)(4). Defendant facilitated the attempted transportation, receipt, and possession of illegal drugs, thus bringing the car within the statute’s grasp. The court rejected the district court’s conclusion that the term “facilitate” connotes causation. This interpretation would render the statute impotent, requiring proof of the impossible–that it was essential that the offender use his own car rather than a rental car. Defense counsel conceded that if a sale had taken place at the meeting, the automobile would be forfeitable. A distinction between the meeting at which the plot is hatched and the meeting at which the drug changes hands would be arbitrary. U.S. v. 1990 Toyota 4Runner, 9 F.3d 651 (7th Cir. 1993).
7th Circuit holds that mobile home is forfeitable as either real or personal property. (970) Claimant sold drugs from his mobile home. The district court concluded that the mobile home was forfeitable under 21 U.S.C. section 881(a)(7), which covers real property used to facilitate a drug crime. Claimant argued that the mobile home was not real property, but rather personal property. The 7th Circuit found that regardless of whether the mobile home was classified as real or personal property, it was forfeitable. If the mobile home was not real property forfeitable under section 881(a)(7), then it was a vehicle, and thus was forfeitable under section 881(a)(4). U.S. v. One 1989 Stratford Fairmont, 986 F.2d 177 (7th Cir. 1993).
7th Circuit affirms that funds, rather than account in which funds are located, must be traced to fraudulent activity. (970) Defendants sold stereo speakers using fraudulent sales techniques, and put the proceeds from the fraud in several different accounts. The United States brought a forfeiture action under 18 U.S.C. section 981 against the funds in these accounts. Claimants contended that they ended their fraudulent scheme in 1988, and the sums seized from the accounts in September 1989 could not be traced to their fraudulent scheme. The government contended that it did not matter whether the balances in the accounts could be traced to unlawful activity since the accounts were “involved in” the fraud during 1988. The 7th Circuit rejected the argument, holding that such tracing was necessary. “It makes no sense to confiscate whatever balance happens to be in a account bearing a particular number, just because proceeds of crime once passed through that account.” Only property used in or traceable to “specified unlawful activity” is forfeit. However, the money seized in this case was forfeitable. Claimants only admitted phasing out the use of one of their fraudulent sales techniques. Abandoning one deceitful device among a large repertory does not make the operation lawful. U.S. v. $448,342.85, 969 F.2d 474 (7th Cir. 1992).
7th Circuit rejects statutory and constitutional challenges to forfeiture of entire parcel of land. (970) Claimant contended that the forfeiture of his entire five-acre parcel was not valid under the civil forfeiture statute because only a portion of the property was “substantially connected” to the drug activity. He also contended that the forfeiture violated the 8th Amendment. The 7th Circuit upheld the forfeiture of the entire five acres. First, a substantial connection is not required between the property and the related drug offense for a civil forfeiture of real estate under 21 U.S.C. section 881(a)(7). The court agreed with other courts that have held that section 881(a)(7) contemplates the forfeiture of an entire tract of land based on drug-related activities on a portion of a tract. Claimant’s 8th Amendment challenge also failed. The court believed that the 8th Amendment does not apply to civil in rem actions, but acknowledged that the opposing view has some support. However, even if the 8th Amendment did apply, claimant failed to show how the forfeiture was disproportional. He mentioned, but did not discuss, any of the factors which are typically considered in determining proportionality. U.S. v. Certain Real Property, Commonly Known as 6250 Ledge Road, Egg Harbor, WI, 943 F.2d 721 (7th Cir. 1991).
8th Circuit holds defendants waived objection to all-or-nothing forfeiture by failing to object to jury instructions. (970) Defendants were convicted of bank fraud and RICO charges stemming from the collapse of the saving and loan association of which they were officers. Defendants argued that the district court should not have forfeited 100 percent of the salaries and bonuses that the jury found were proceeds of RICO activity. They contended on appeal that portions of the salaries and bonuses were earned through legal activity. The 8th Circuit found that defendants had waived this complaint by failing to object below to the jury instruction and verdict form. Moreover, the evidence supported complete forfeiture of the salaries and bonuses. U.S. v. Olson, 22 F.3d 783 (8th Cir. 1994).
8th Circuit looks to instrument creating property interest to determine extent of property subject for forfeiture. (970) Defendants owned a farm comprised of four tracts. The district court ordered the forfeiture of one of the tracts based on defendants’ drug trafficking activities. The 8th Circuit found this erroneous, holding that all four tracts should have been viewed as a single parcel of land for forfeiture purposes. The court agreed with the 6th Circuit’s view that the source for defining property subject to forfeiture is the instrument creating a defendant’s interest in the property. The critical facts here were that defendants acquired all four tracts comprising their farm as a single unit, in a single deed, and the property was contiguous. These facts indicated the property was a single unit for purposes of § 853(a). Judge Gibson dissented. U.S. v. Bieri, 21 F.3d 811 (8th Cir. 1994).
8th Circuit holds two tracts were indivisible where defendant reacquired property in a single instrument. (970) Defendant argued that the district court erred in treating his farm as a single indivisible parcel of property for forfeiture purposes, since he had originally acquired the property as two separate farms by two separate instruments. The 8th Circuit found no error. Under the test adopted in a companion case, U.S. v. Bieri, 21 F.3d 811 (8th Cir. 1994), tracts of real property subject to forfeiture under § 853 are defined by the instruments and documents that created the defendant’s interest in the property. Although defendant originally acquired the property in two separate instruments, he legally lost his interest in the farm through foreclosure and obtained a new interest in the property by repurchasing it as a single unit, at a single time, for a single price, and in a single instrument. Therefore, the farm could be considered a single parcel for forfeiture purposes. U.S. v. Myers, 21 F.3d 826 (8th Cir. 1994).
8th Circuit holds that court can refuse forfeiture under section 1955 if it is disproportionate. (970) Under 18 U.S.C. section 1955(d), any property used in an illegal gambling operation “may be seized and forfeited.” The 8th Circuit held that unlike mandatory provisions found in other forfeiture statutes, this language does not require an automatic forfeiture where an illegal gambling operation is shown. Courts have some discretion, and can refuse a forfeiture if it seems to work a disproportionate penalty in a particular case. However, this does not grant courts the authority to subdivide property in order to create a proportional forfeiture. Here, the forfeiture of the entire property was proportional, even though claimants only used the second floor of the building for their gambling operation. Claimant was part of a national organization which facilitated gambling in its member chapters. The national organization received a percentage of the profits realized from the illegal gambling operations of its member chapters. U.S. v. Premises Known as 318 South Third Street, Minneapolis, Minnesota, 988 F.2d 822 (8th Cir. 1993).
8th Circuit reaffirms that real property used in illegal gambling operations is forfeitable. (970) Following U.S. v. South Half of Lot and Lot 8, Block 14, 910 F.2d 488 (8th Cir. 1990) (en banc), cert. denied, 111 S.Ct. 1389 (1991), the 8th Circuit affirmed that real property used in illegal gambling operations may be seized and forfeited under 18 U.S.C. section 1955. U.S. v. Premises Known as 318 South Third Street, Minneapolis, Minnesota, 988 F.2d 822 (8th Cir. 1993).
9th Circuit says government may not restrain substitute assets before conviction. (970) 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 says abatement doctrine does not apply to forfeitures under 21 U.S.C. section 881. (970) The government arrested an individual following a drug raid at his residence and seized cash during the raid. The cash was forfeited as drug money, pursuant to 21 U.S.C. section 881(a)(6). The individual was later convicted of narcotics and firearms violations but died pending appeal and the judgment and indictment were abated. The surviving spouse sought the seized money, arguing the forfeiture judgment also abated because of the death. The 9th Circuit rejected the claim, finding that because 21 U.S.C. section 881 is primarily civil in nature, the abatement doctrine does not apply. An action only abates if the underlying statute is penal in nature. The relation back provision in section 881(h) also operated to vest title of the property in the government upon commission of the crime. Consequently, at the time of the death, the individual did not have title to the property and his estate cannot now obtain title through him. U.S. v. $84,740 Currency, 981 F.2d 1110 (9th Cir. 1992).
11th Circuit holds Florida homestead property is not exempt from federal forfeiture. (970) Claimants argued that, as a matter of law, their Florida homestead property was exempt from forfeiture even if the property was used in violation of federal gambling laws. The 11th Circuit rejected this claim, concluding that the state exemption for forfeiture based on the Florida homestead law is preempted in a forfeiture action brought under 18 U.S.C. § 1955(d). Although forfeiture of a homestead under a Florida forfeiture statute has been prohibited, Congress did not intend state law to limit the forfeiture provisions of 18 U.S.C. § 1955. U.S. v. One Single Family Residence Located at 18755 North Bay Road, Miami, 13 F.3d 1493 (11th Cir. 1994).
11th Circuit holds that forfeiture provision of gambling statute includes real property. (970) Following the 2nd, 7th and 8th Circuits, the 11th Circuit held that 18 U.S.C. section 1955(d), which provides for the forfeiture of “any property” used for illegal gambling purposes, applies to real property. The plain meaning of the words “any property” necessarily encompasses real property. Moreover, at the time of its enactment, section 1955 was part of the Organized Crime Control Act of 1970, which also included the RICO and CCE statutes. The civil forfeiture provisions of RICO and CCE both have been interpreted to include real property. Although in 1984 the RICO and CCE forfeiture provisions were amended to expressly include real property while section 1955(d) was not, the court refused to find any negative implication from Congress’ failure to act. U.S. v. Premises Located at Route 13, 946 F.2d 749 (11th Cir. 1991).