Court News
Updated March 13, 2011

This section of the website contains news stories highlighting important court decisions dealing with asset forfeiture and related issues.  The actual opinions for these cases may sometimes be found in the FEAR website's Law Library, or by clicking the opinion link in the story.


U.S. 6th Circuit Court of Appeals, February 16, 2010
US v. $22,050.00 US Currency, No. 08-6335
In an in rem forfeiture action in connection with a drug distribution and money laundering investigation wherein the United States Drug Enforcement Administration seized $22,050 from petitioner's office, judgment of the district court denying his motion to set aside default and entry of judgment in favor of the United States is reversed where: 1) in civil forfeiture cases such as this one, where the question is whether to excuse a known claimant's failure to file a verified claim and answer in the allotted time, district courts should analyze the case using the generally applicable Federal Rules (Rule 55(c)) rather than under the appellate court's requirement of "strict compliance" with the forfeiture rules; 2) the government would not have been prejudiced by setting aside the default; 3) claimant has asserted meritorious defenses to the forfeiture claim; and 4) on remand, it must be determined whether claimant was culpable under Rule 55(c) for the default by willfully fail! ing to appear and plead. Read more...

 

U.S. 5th Circuit Court of Appeals, December 17, 2009
US v. $500,000 in US Currency, No. 08-20579
In an asset forfeiture proceeding in which a company claiming to be the rightful owner of the funds at issue objected and filed a claim pursuant to 18 U.S.C. section 983, dismissal of the claim for lack of standing is reversed where: 1) the pleadings alleged that claimant owned the actual seized dollars; and 2) the evidence claimant attached to its response to the government's motion to dismiss supported the pleadings' allegations.Read more...

 

U.S. 7th Circuit Court of Appeals, October 27, 2009
US v. Venturella, No. 07-3754
District court's conviction of defendants for mail fraud and order to pay a criminal forfeiture money judgment and restitution is affirmed as: 1) forfeiture is not limited solely to the amounts alleged in the count(s) of conviction pursuant to 18 U.S.C. section 981(a)(1)(C); 2) defendants waived their rights to forfeiture calculations review on appeal; and 3) imposing restitution and forfeiture for the same crime is not an improper double payment. Read more...


U.S. 11th Circuit Court of Appeals, October 26, 2009
US v. Velez, No. 09-10199
In the government's appeal from a district court's dismissal of a money laundering charge against defendants, the order is affirmed where monetary transactions made for the purpose of securing legal representation are exempt from criminal penalties under 18 U.S.C. section 1957(f)(1). Read more...

U.S. 7th Circuit Court of Appeals, November 19, 2009
US v. Miller, No. 09-2256
District court's order to destroy 34 firearms and for defendant to collect just compensation from the government arising from his conviction of aiding and abetting the possession of firearms by a felon, is vacated and remanded where: 1) because the government did not commence a timely forfeiture proceeding, defendant's property interest in the firearms continues even though his possessory interest has been curtailed; and 2) as such, if the government does not want to sell the firearms for his account, then it must offer defendant some other lawful option, such as having a trustee sell or hold the guns, or giving them to someone who can be relied on to treat them as his own. Read more...

 

U.S. 8th Circuit Court of Appeals, November 18, 2009
US v. Moser, No. 08-2909
In a petition for attorney's fees pursuant to the Civil Asset Forfeiture Reform Act (CAFRA) after petitioner prevailed in an asset forfeiture proceeding pursuant to 21 U.S.C. section 853(n), denial of the petition is affirmed where the arguments for and against permitting a prevailing section 853(n) petitioner to receive attorneys' fees from the government were too closely balanced to allow the court of appeals to conclude that Congress's waiver of sovereign immunity clearly and unequivocally applied in this situation. Read more...

12/2/09 federal rules amendments:

As of today, the Criminal Procedure and Appellate Procedure Rules have been changed so that there is no such thing as not counting weekends and

holidays.  Only calendar days matter.    See Fed. R. Crim. P. 45(a)(1)(B)

and Fed. R. App. P.  26(a)(1)(B).  This change required changing all the references to time limits of 11 days or less [which previously did not count weekends and holidays].  So for the most part all time limits of 10 days are now 14 days, e.g. for notices of appeal.  This could make a difference when previously you would get an extra day when there was a holiday mixed within the 10 days.  Also, the time to file post-verdict motions for acquittal and new trial and post-judgment motions to correct clear error have changed from 7 to 14 days.  Time to respond to appellate motions has changed from 8 to 10 days.  Reply briefs must be filed within 7 rather than 3 days of oral argument.  Fed. R. App. P. 26(c) clarifies that the 3 days for mailing after service of a document [which applies unless the document is hand-delivered] begins to run only after the date you determine the response would have been due absent the extra three days.

Other changes to the criminal procedure rules: Rule 41 specifies that a warrant may authorize the seizure of electronic media and that, unless otherwise stated, that kind of warrant is assumed to allow for a later review of the information in the media.  The time for executing the warrant does not restrict when later off-site reviews must be conducted.  The inventory may just refer to the "physical storage media" that was seized, not the information found within it.

Rule 32(G) requires the presentence report to specify whether the government seeks forfeiture.  Rule 32.2 has been amended with respect to how  criminal forfeiture proceedings should be conducted and it states that notice of forfeiture in the indictment should not be designated as a count and need not identify the property or money amount subject to forfeiture.


U.S. 11th Circuit Court of Appeals, August 19, 2009
US v. Certain Real Prop., No. 08-14334
In the government's appeal from an attorney's fee award following the dismissal of the government's civil forfeiture action, the award is reversed where attorney's fees incurred in the defense of a criminal action may not be awarded in a related civil forfeiture action under the Civil Asset Forfeiture Reform Act of 2000 without regard for the stringent limitations on attorney-fee awards in criminal cases under the Hyde Amendment. Read more...

U.S. 6th Circuit Court of Appeals, August 25, 2009
US v. Salti, No. 07-4487
In an appeal from a dismissal of a petition asserting an interest in a bank account the court had ordered forfeited as a result of the government's plea agreement with one petitioner's nephew, the order is reversed where a petitioner's alleged ill health is clearly relevant to whether the petitioner is deliberately avoiding prosecution by declining to enter or reenter the U.S., and such an argument is properly asserted in response to the government's attempt to apply the fugitive disentitlement statute. Read more...

 

U.S. 7th Circuit Court of Appeals, August 24, 2009
US v. Marrocco, No. 07-3101
In forfeiture proceedings involving cash that was suspected to be connected to drugs, district court's grant of defendant's motion to suppress dog-sniff test evidence is reversed and remanded where: 1) the police officers' suspicion that a briefcase contained drugs or money associated with drugs was reasonable; 2) detention of the briefcase was reasonable; and 3) officer's unlawful search of the briefcase fell under under the inevitable discovery doctrine where the government obtained an independent legal justification for conducting a search which led to the discovery of the evidence and officers inevitably would have sought the warrant and conducted a lawful search.Read more...


U.S. 9th Circuit Court of Appeals, August 26, 2009
US v. Comprehensive Drug Testing, Inc., No. 05-10067
In cases arising from the federal investigation of the Bay Area Lab Cooperative (Balco) and its alleged distribution of illegal steroids to professional baseball athletes, orders quashing subpoenas seeking information regarding drug tests performed on baseball players are affirmed over the government's appeal where: 1) the government failed to timely appeal one of the orders, which determined that the government failed to segregate intermingled data, and thus the order had preclusive effect on the other pending cases; and 2) Fed. R. Crim. P. 41(g) was an appropriate means of obtaining the return of property improperly seized by the government. Read more...


Government uses fraud injuction statute to over reach in its restraint of creditors' assets in Petters' $3.5 billion fraud case

On July 10, 2009, the Securities and Exchange Commission announced fraud charges and an asset freeze against a Highland Park, Ill.-based hedge fund manager and his firm for facilitating a multi-billion dollar Ponzi scheme operated by Minnesota businessman Thomas Petters.

The SEC's complaint, filed in U.S. District Court for the District of Minnesota, alleges that Gregory Bell and Lancelot Management LLC invested more than $2 billion in hedge funds assets with Petters and pocketed millions of dollars in fraudulent fees at the expense of investors in the funds. The SEC's complaint also charges Petters with fraud for perpetrating the massive Ponzi scheme through the sale of notes related to consumer electronics. When Petters's scheme began to unravel, Bell participated in a series of sham transactions to conceal that Petters owed more than $130 million in investor payments on the notes.

Petters was previously charged with an alleged $3.5 billion dollar Ponzi scheme by the U.S. Attorney for the District of Minnesota in early October 2008, and his assets were frozen at that time. But rather than obtaining a pre-indictment restraining order under 21 U.S.C. 853(e)(1)(B), the government claimed much broader powers by using 18 U.S.C. 1345, the "fraud injunction" statute. Section 1345(a)(2) is not a forfeiture statute.  It is easier to obtain and, in contrast to forfeiture statutes that require the government must first give notice and an opportunity for a hearing to persons appearing to have an interest in the property,  section 1345(a)(2) permits the government to obtain a temporary restraining order ex parte--without notice or opportunity for secured creditors to intervene.

A forfeiture restraint order under 853 is only effective for up to 90 days unless extended by court for good cause or unless an indictment or information alleging forfeiture is files. But section 1345(a)(s) places no time limit on the duration of a preliminary or permanent injunction or restraining order.  Former head of the Department of Justice' asset forfeiture division, David Smith writes in Prosecution and Defense of Forfeture cases:

Section 1345(a)(2) gives the government two distinct remedies to prevent the dissipation of asssets obtained as a result of a "banking law violation" (as defined in 18 U.S.C. 33322(d)) or a "Federal healthcare offense" or property traceable to such an offense. Section 1345(a)(2)(A) provides an in rem action to enjoin the alienation or disposition of "property" obtained as a result of the fraud. An in rem action must link the assets to be frozen with the fraud.  That is because section 1345(a)(2)(A) does not reach "property of equivalent value." An in rem action permits the freezing of assets whether or not the court has jurisdiction over the person who obtained them, so long as the court has jurisdiction over the property.  

Section 1345(a)(2)(B) provides an in personam remedy: a restraining order prohibiting "any person from withdrawing, transferring, removing, dissipating, or disposing of any [property obtained as a result of a specified banking law or Federal healthcare offense] or property of equivalent value."

The in personam prong of section 1345 authorizes the restraint of "property of equivalent value" belonging to a criminal defendant who is alienating or intends to alienate proceeds of a fraud or healthcare violation-- i.e., what are called "substitute assets" in the criminal forfeiture context--however, the criminal forfeiture statute does not allow the government to restrain "substitute assets" prior to trial, either before or after an indictment has been obtained.

Several secured creditors of Petters' companies have sought to intervene in the Petters fraud injunction case, <>

Access free pleadings filed in Petters $3.5 billion fraud case:
SEC v. Petters, Bell, Lancelot Investment Management LLC, civil case  # 09-cv-01750, filed 7/8/2009
United States v. Thomas Peters, civil case # 0:08-cv-05348 (18 U.S.C. 1345 "fraud injunction"), filed 10/2/2008 [Additional pleadings presently being added.]

D. C. Docket No. 05-00307-CR-T-24-MSS

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

MARSHA LYNN HOFFMAN-VAILE,

Defendant-Appellant.

May 27, 2009


D. The District Court Erred When It Calculated the Amount of the Forfeiture

Money Judgment.

Dr. Hoffman-Vaile argues that the district court erred when it calculated the forfeiture amount because it included the losses to private insurance companies and patients. “The court, in imposing sentence on a person convicted of a Federal health care offense, shall order the person to forfeit property, real or personal, that constitutes or is derived, directly or indirectly, from gross proceeds traceable to the commission of the offense.” 18 U.S.C. § 982(a)(7). Dr. Hoffman-Vaile argues that she “can only be ordered to repay proceeds that resulted from Medicare

20

fraud[,]” and “[a]ny amounts that she received from private insurance companies or other payors did not result from Medicare fraud.” Because she has been ordered to pay restitution to the other victims, she argues that she should not be required to forfeit that amount to the government as well. This argument fails. The amounts that Dr. Hoffman-Vaile received from private insurance companies and patients are “gross proceeds traceable to the commission of” her fraud because, but for her Medicare fraud, she would not have been entitled to collect these sums from the companies and patients. See id. We are not persuaded by Dr. Hoffman-Vaile’s argument that her forfeiture amount should be reduced because she has paid restitution to the other victims. Although “this might appear to be a ‘double dip,’ restitution and forfeiture serve different goals[.]” United States v. Leahy, 464 F.3d 773, 793 n.8 (7th Cir. 2006). “[T]he focus of restitution is on the victim, [but] forfeiture focuses on the defendant.” United States v. Browne, 505 F.3d 1229, 1281 (11th Cir. 2007). “In addition to forcing the disgorgement of dishonest profits, therefore, forfeiture is also a punitive action against the defendant.” Id. The district court did not err when it included in the forfeiture amount the sums paid by Dr. Hoffman-Vaile’s other victims, the private insurance companies and her patients. Although the district court used the correct methodology, it miscalculated the amount of the forfeiture money judgment, as the

21

government concedes. We vacate the judgment of forfeiture to allow the district court to correct the forfeiture amount from $705,161.87 to $695,742.96.

IV. CONCLUSION

We AFFIRM Dr. Hoffman-Vaile’s convictions and sentences, except that we VACATE the forfeiture money judgment and REMAND for further proceedings consistent with this opinion.

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 07-12629

________________________

D. C. Docket No. 05-00307-CR-T-24-MSS

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

MARSHA LYNN HOFFMAN-VAILE,

Defendant-Appellant.

________________________

Appeal from the United States District Court

for the Middle District of Florida

_________________________

(May 27, 2009)

Before BLACK,

22
U.S. 11th Circuit Court of Appeals, August 06, 2008
US v. $125,938.62, No. 07-10380
In a civil forfeiture action under the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), court's order of forfeiture is affirmed in part and reversed in part where: 1) the government met its burden of proving that two of the certificates of deposit were subject to forfeiture because they were derived from funds stolen from the Nicaraguan treasury; but 2) with respect to five other certificates, the government failed to meet its burden to present evidence of a connection between those funds and funds stolen from the Nicaraguan treasury. Read more...
U.S. 11th Circuit Court of Appeals, July 22, 2008
US v. De La Mata, No. 05-15793
In a case where the government obtained defendants' promises to convey certain interests in property to the United States, in lieu of a forfeiture trial and sentence, an order granting the government's motion for a "final order of forfeiture" is affirmed in part and vacated in part where: 1) individual defendants and corporate defendants were properly before the court of appeals; 2) the circuit court rejects individual defendants' argument that the district court lacked subject matter jurisdiction because the government's motion sought relief in a criminal case via amended sentences; but 3) corporate defendants were not parties to individual defendants' agreements and thus retained certain property interests. Read more...

 

U.S. 7th Circuit Court of Appeals, July 01, 2008
Stevens v. US, No. 08-1283
In proceedings arising from a criminal prosecution, denial of petitioner's motion to return property is affirmed where: 1) the government met its burden of showing that it was no longer in possession of the items seized; 2) there is no presumption of untruthfulness in a Fed. R. Crim. P. 41(g) proceeding; and 3) defendant may not challenge his conviction by way of a Rule 41(g) motion. Read more...

 


U.S. 9th Circuit Court of Appeals, June 30, 2008
US v. Harrell, No. 07-10238
In a case involving unauthorized viewing of satellite television and the government's seizure of certain digital satellite television receivers and other hardware and software, partial denial of defendant's motion for return of property filed pursuant to Federal Rule of Criminal Procedure 41(g) is affirmed in part and reversed in part where: 1) there must be a change to either the hardware or software of a telecommunications instrument that makes it more capable of obtaining unauthorized signals in order for it to be "modified or altered" under 18 U.S.C. section 1029(a)(7); 2) under such standard, certain receivers at issue were not modified or altered so as to constitute contraband per se; and 3) some other hardware and software was also not shown to constitute contraband per se. Read more...

 



This is an excellent decision!  Third parties whose property is seized in criminal forfeiture cases have few procedural rights.  When the government opts to process the case as a criminal forfeiture, third parties have to just sit and wait until the criminal prosecution is over before being given any due process at all.

Based on precedents holding that third party proceedings under 21 U.S.C. §853(n) are civil in nature, this district court opinion held that such proceedings qualify for CAFRA attorney's fees.
–Brenda Grantland

541 F. Supp. 2d 794; 2008 U.S. Dist. LEXIS 25068, *
UNITED STATES OF AMERICA, v. BRUNO CAVELIER D'ESCLAVELLES, Defendant, PETR BUK, Petitioner.
CASE NO. 1:06cr235
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA, ALEXANDRIA DIVISION
541 F. Supp. 2d 794; 2008 U.S. Dist. LEXIS 25068

March 25, 2008, Decided
March 25, 2008, Entered

COUNSEL:  [*1] For Gov't: Karen Ledbetter Taylor , Assistant United States Attorney.

For Defense: Daniel T. McNamara, Steven J. McCool , Mallon & McCool, LLC, Washington, D.C.

JUDGES: Gerald Bruce Lee , United States District Judge.

OPINION BY: Gerald Bruce Lee 
OPINION

AMENDED MEMORANDUM ORDER

THIS MATTER is before the Court on Petitioner Petr Buk's Motion for Attorneys' Fees. This motion follows a successful suit by the Petitioner to recover funds from a bank account the government seized from third parties in a criminal forfeiture proceeding. There are two issues before the Court: (1) whether the attorneys' fees provisions of the Civil Asset Forfeiture Reform Act ("CAFRA") granting attorneys' fees and costs to a prevailing claimant in "any civil proceeding to forfeit property under any provision of Federal law" applies to the Petitioner where he has prevailed in an action under 21 U.S.C. § 853(n), a section of a criminal forfeiture statute that allows innocent owners to petition for the return of assets seized from third parties; and (2) if the Court determines CAFRA's attorneys' fees provision is applicable, whether $ 17,322.50 is a reasonable award. The Court grants Plaintiff's Motion for Attorneys' Fees and awards Petitioner attorneys'  [*2] fees in the amount of $ 17,222.50, because he has prevailed in a civil proceeding to forfeit property and thus is entitled to fees and costs under the plain language of CAFRA, and the requested fees are not unreasonable.

I. BACKGROUND

In April, 2006, Petitioner Petr Buk gave $ 125,000 to Adrien Pruvot as an investment in a proposed film production. Mr. Pruvot then deposited that money, and funds from other sources, into a bank account. Soon thereafter, Mr. Pruvot and others pled guilty to drug conspiracy and money laundering charges, and agreed to forfeit the account containing Petitioner's investment. Following those criminal forfeiture proceedings, Petitioner filed a petition under 21 U.S.C. § 853(n) n1 asking the government to return that portion of the account representing his investment. On August 13, 2007, this Court held, under a theory of constructive trust, that Petitioner retained equitable title to the money he had invested with Mr. Pruvot. This Court ordered the United States to return $ 125,000 of the seized funds to Petitioner.

FOOTNOTES

n1 21 U.S.C. § 853(n)(2) reads: "Any person, other than the defendant, asserting a legal interest in property which has been ordered forfeited to the  [*3] United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury."

Petitioner now moves for an award of $ 17,322.50 in attorneys' fees under § 2465(b)(1)(A) of CAFRA. The relevant portion of the statute reads: HN1"in any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails, the United States shall be liable for . . . reasonable attorney fees and other litigation costs reasonably incurred by the claimant." 28 U.S.C. § 2465(b)(1)(A).

The parties offer two competing interpretations of the phrase "any civil proceeding to forfeit property under any provision of Federal law." The government argues that Petitioner's petition is not covered by this language, as "any civil proceeding to forfeit property" is essentially a convoluted way of saying "civil forfeiture proceeding." Therefore, because the property in this case was seized under a criminal forfeiture statute, and  [*4] not a civil forfeiture statute, § 2465(b)(1) does not apply. (Government's Opp'n 2.) Petitioner argues that he is eligible for fees under the literal text of the statute, because even though his petition was ancillary to a criminal forfeiture, the hearing that followed was a civil proceeding in which one party attempted to forfeit the assets of the another. (Pl.'s Reply 1-2).

II. DISCUSSION

A. Standard of Review

HN2When interpreting a statute such as CAFRA, the Court's primary purpose is to "ascertain and implement the intent of Congress." Scott v. United States, 328 F.3d 132, 138-39 (4th Cir. 2003) (citing Brown & Williamson Tobacco Corp. v. FDA, 153 F.3d 155, 161-62 (4th Cir. 1998)). The first step involves determining whether the text has a plain and unambiguous meaning as applied to the dispute before the Court. Robinson v. Shell Oil Co., 519 U.S. 337, 340-41, 117 S. Ct. 843, 136 L. Ed. 2d 808 (1997); Scott, 328 F.3d at 139. The individual words in the text are given their "ordinary, contemporary and common meaning[s]". Scott, 328 F.3d at 139. If this analysis resolves any apparent ambiguity, the Court's only duty is to "enforce [the statute] according to its terms." Discover Bank v. Vaden, 396 F.3d 366, 369 (4th Cir. 2005) [*5] (internal quotation omitted).

HN3Where a claimant is eligible, CAFRA authorizes a court to award "reasonable" attorneys' fees. 28 U.S.C. § 2465(b)(1)(A). To determine if an award is reasonable, a court must first calculate a "lodestar" figure - the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. United States v. $ 23,400 in United States Currency, 2007 WL 1080292 (W.D.N.C. Apr., 2007). A court may then adjust this number up or down to account for unusual circumstances. Id. In calculating the lodestar figure, a court must take into account the twelve factors identified by the Fourth Circuit in Daly v. Hill, 790 F.2d 1071, 1077 (4th Cir. 1986). n2

FOOTNOTES

n2 HN4The lodestar factors include: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to properly perform the legal service; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10)  [*6] the 'undesirability' of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

B. Analysis

The Court grants Petitioner's Motion for Attorneys' Fees, because he has substantially prevailed in a civil proceeding to forfeit property. The hearing that followed Mr Buk's § 853(n) petition was a "civil proceeding to forfeit property" as required by 28 U.S.C. § 2465(b)(1); because he prevailed in that suit, the government is liable for Mr. Buk's reasonable costs and attorneys' fees. 28 U.S.C. § 2465(b)(1)(A).

As there is no binding authority in the Fourth Circuit regarding the applicability of CAFRA to forfeiture proceedings brought pursuant to 853(n), the Court's analysis is guided by the text of the statute. Conn. Nat'l Bank v. Germain, 503 U.S. 249, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992). The relevant portion of CAFRA reads: "in any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails, the United States shall be liable for . . . reasonable attorney fees and other litigation costs reasonably incurred by the claimant." 28 U.S.C. § 2465(b)(1)(A) (emphasis added). HN5It looks to (1) "the language itself,"  [*7] (2) "the specific context in which that language is used," and (3) "the broader context of the statute as a whole" to determine whether the text has a plain and unambiguous meaning as applied to the dispute before the Court. Robinson v. Shell Oil Co., 519 U.S. 337, 340-41, 117 S. Ct. 843, 136 L. Ed. 2d 808 (1997); Scott, 328 F.3d at 139.

The plain text of the attorneys' fees provision, 28 U.S.C. § 2465(b)(1), provides that it is applicable to "any civil proceeding to forfeit property", under "any provision of Federal law." HN6The Court presumes that the "legislature says in a statute what it means, and means in a statute what it says there." Conn. Nat'l Bank v. Germain 503 U.S. at 253-54, and under the plain terms of the statute an ancillary proceeding under 21 U.S.C. § 853(n) is such a proceeding. HN7A third-party claimant to assets seized in a criminal forfeiture may not intervene in the criminal proceeding, FED. R. CRIM. P. 32.2(b)(2), but must instead file a petition under 21 U.S.C. § 853(n). The hearing that follows is civil in nature. See United States v. Douglas, 55 F.3d 584 (11th Cir. 1995) (holding that an ancillary § 853(n) proceeding to recover property seized from third parties in a criminal forfeiture is a 'civil [*8] action' under the Equal Access to Justice Act). Because the purpose of the § 853(n) proceeding is to determine if the claimant's property is subject to government forfeiture, n3 it is literally a "civil proceeding to forfeit property under [a] provision of Federal law" as described in § 2465(b)(1).

FOOTNOTES

n3 When a third-party asserts an interest in property under § 853(n), the attempted forfeiture is not perfected until the conclusion of that proceeding. See 21 U.S.C. § 853(n)(7) ("Following disposition of all petitions filed under this section, or . . . expiration of the period provided . . . the United States shall have clear title to property that is the subject of the order of forfeiture . . .") (emphasis added).

The Court's interpretation of section 2465(b)(1) is supported by reference to the language used elsewhere in CAFRA. If the phrase "civil proceeding to forfeit property" were interchangeable with "civil forfeiture proceeding," one would expect to see it used repeatedly in CAFRA. But it appears only once - in section 2465(b)(1). Throughout the statute, Congress refers explicitly to "civil forfeiture proceedings," and the exact phrase "civil forfeiture proceeding under a civil forfeiture  [*9] statute" appears at least six times. Compare, e.g., 18 U.S.C. § 983(a)(1)(A)(i); 18 U.S.C. § 983(a)(2)(A); 18 U.S.C. § 983(b)(1)(A); 18 U.S.C. § 983(b)(2)(A); 18 U.S.C. § 983(e)(1); 18 U.S.C. § 983(h)(1) ("any civil forfeiture proceeding under a civil forfeiture statute"); with 28 U.S.C. § 2465(b)(1) ("any civil proceeding to forfeit property under any provision of federal law") (emphasis added). Congress's decision to use different terminology in this single provision, section 2465(b)(1), strongly suggests that the phrase "civil proceeding to forfeit property" is not interchangeable with "civil forfeiture proceeding", and that Congress intended the language in § 2465(b)(1) to convey some different meaning. See BFP v. Resolution Trust Corp., 511 U.S. 531, 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994) (HN8"It is generally presumed that Congress acts intentionally and purposely when it includes particular language in one section of a statute but omits it in another.") (internal quotation omitted); Barmes v. United States, 199 F.3d 386, 389 (7th Cir. 1999) ("Different language in separate clauses in a statute indicates Congress intended distinct meanings.") (citation omitted).

The government's argument to the contrary is summarized  [*10] concisely in its brief - "[b]ecause the forfeiture in this case was brought pursuant to a criminal forfeiture statute and not a civil forfeiture statute, by its terms, the CAFRA attorneys' fee provision does not apply." (Government's Opp'n 2.) However, applicability of the attorneys' fees provision of CAFRA turns on the status of the claimant and the nature of the proceeding for which attorneys' fees are sought, not on how the government chose to initiate the seizure - thus the phrase "under any provision of Federal law." 28 U.S.C. § 2465(b)(1) (emphasis added). There is simply nothing in the language of § 2465(b)(1) that conditions eligibility on how the government chose to seize the property. While Congress clearly did not intend to provide attorneys' fees for defendants to criminal forfeiture proceedings, n4 the text of the statute does not exclude these defendants based on the nature of the forfeiture; rather, defendants are ineligible for attorneys' fees because they were not parties to a civil proceeding as required by § 2465(b)(1).

FOOTNOTES

n4 The Court's interpretation does not conflict with this policy or create a loophole in the law. Under principles of res judicata, a defendant whose  [*11] property claims have already been adjudicated in a criminal forfeiture proceeding would not be able to re-litigate them in a civil proceeding, and thus could not meet the requirements of § 2465(b)(1).

Moreover, the two cases the government cites in support of its argument are unpersuasive. (See Government's Brief at 2-3) (citing United States v. Gardiner, 512 F. Supp. 2d 1270, 2007 WL 2462635 (S.D. Fla. 2007); Synagogue v. United States, 482 F.3d 1058 (9th Cir. 2006)). Gardiner simply echoes the government's construction of CAFRA, interpreting the phrase "any civil proceeding to forfeit property" as "any civil forfeiture proceeding" with no further elaboration or description of its analysis. 512 F. Supp. 2d 1270, 2007 WL 2462635 at 2. Similarly, Synagogue has no bearing on the applicability of CAFRA in this case. The government cites Synagogue for the proposition that CAFRA "does not apply where claimant's property is subject to criminal forfeiture." (Government's Opp'n at 3). However, Petitioner's property was never subject to criminal forfeiture; his property was subjected to seizure, not forfeiture. Buk v. United States, No. 1:06cr235 (D. Va. Aug. 13, 2007); See also United States v. Kahn, 497 F.3d 204, 209 note 6 (2d Cir. 2007)  [*12] (distinguishing literal forfeiture from the legal status of being "subject to" forfeiture). Accordingly, the Court concludes that the government's argument is without merit.

Because the Court finds that the plain language of 28 U.S.C. § 2465(b)(1)(A) applies to Petitioner's proceeding under § 853(n), and is not persuaded by the governments' arguments, the Court grants Petitioner's Motion for Attorneys' Fees. Although the assets in question were originally seized in connection with a criminal forfeiture, Petitioner was not a party to those proceedings and has not been accused of any criminal activity. It was only after the conclusion of the criminal forfeiture that Petitioner filed a petition, pursuant to 21 U.S.C. § 853(n), to recover the funds he invested in a proposed film production. As the hearing that followed was a "civil proceeding to forfeit property under [a] provision of Federal law," and Petitioner substantially prevailed, the government is liable for his attorneys' fees under the plain language of the statute. 28 U.S.C. 2465(b)(1)(A).

Having determined that Petitioner is entitled to attorneys' fees under CAFRA, the Court concludes that $ 17,222.50 is a reasonable fee for [*13] this case. Petitioner has submitted detailed time sheets requesting $ 15,437.50 in fees for Partner Stephen J. McCool (47.5 hours at $ 325), $ 1,785.00 for associate Dan McNamara (10.2 hours at $ 175), and $ 100 for Westlaw research costs - a total of $ 17,322.50. (PX1.) The government has not opposed the amount of fees requested. The Petitioner's attorneys have also submitted an affidavit from a nationally known forfeiture expert who practices in the Washington area, attesting to the reasonableness of the rates sought and the hours expended for this type of litigation. (PX2; Smith Aff. at P 6.) The Court has reviewed this affidavit and the time sheets for each attorney and finds an award of $ 17,222.50 reasonable for this litigation. The $ 100 requested for Westlaw research will not be permitted, because research costs are already represented in an attorneys' hourly rate.

III. Conclusion

The Court grants Petitioner's Motion for Attorneys' Fees in the amount of $ 17,222.50. The hearing that followed Petitioner's § 853(n) petition constituted a "civil proceeding to forfeit property" under 28 U.S.C. § 2465(b)(1). Because Petitioner substantially prevailed in that proceeding, the government  [*14] is liable for his reasonable attorneys' fees and costs under the plain language of the CAFRA attorneys' fees provision. 28 U.S.C. § 2465(b)(1)(A).

Accordingly, it is hereby

ORDERED that Petitioner Petr Buk's Motion for Attorneys' Fees is GRANTED. The Clerk is directed to enter judgment, pursuant to Federal Rule of Civil Procedure 58, in favor of Petitioner Petr Buk, and against Defendant United States of America in the amount of $ 17,222.50. It is further

ORDERED that Defendant United States of America pay Petitioner Petr Buk attorneys' fees in the amount of $ 17,222.50.

The Clerk is directed to forward a copy of this Order to counsel of record.

ENTERED this 25th day of March, 2008.

/s/ Gerald Bruce Lee

Gerald Bruce Lee

United States District Judge

Alexandria, Virginia

3/25/08



Seventh Circuit: Smith v. City of Chicago, No. 07-1599.

A prompt hearing is required whether the property can be held pending a final hearing.

http://www.wislawjournal.com/article.cfm/2008/05/12/Appellate-decision-leaves-states-seizure-practices-in-question-Court-Car-seizure-as-drug-asset-requi

Appellate decision leaves state's seizure practices in question
Court: Car seizure as drug asset requires preliminary hearing
by David Ziemer

May 12, 2008

Wisconsin's procedures for seizure of personal property as drug assets are constitutionally suspect.

A May 2 decision from the Seventh Circuit held that Illinois' procedures fail to provide the property owner a hearing within a reasonable time. Wisconsin's procedures arguably have the same defect

Assistant District Attorney Barbara A. Michaels, who handles forfeitures in Waukesha County, acknowledged that the federal case could be applied to Wisconsin's procedures for forfeitures as well.

The Illinois Drug Asset Forfeiture Procedure Act (DAFPA), 725 ILCS 150/1 et seq., permits the seizure of vehicles, aircraft, and vessels along with money involved in certain drug crimes.
...[snip]...

Six plaintiffs who had property seized under the law filed an action against the Chicago Police Department, contending that the law failed to provide a post-deprivation hearing within a reasonable time.

The district court dismissed the action, relying on Jones v. Takaki, 38 F.3d 321 (7th Cir. 1994).

The plaintiffs appealed, and the Seventh Circuit reversed, in a decision by Judge Terence T. Evans, overruling Jones.

The length of time between the seizure, and the ultimate hearing was not a problem for the court, but the absence of a preliminary hearing was.

The court cited with approval a Second Circuit case, Krimstock v. Kelly, 306 F.3d 40 (2nd Cir. 2002).

In Krimstock, the court held that, with respect to seizures of automobiles, a prompt hearing is required, to determine whether the vehicle can be held, pending the actual forfeiture hearing.

Judge Evans agreed, writing, "Our society is, for good or not, highly dependent on the automobile. The hardship posed by the loss of one's means of transportation . can result in missed doctor's appointments, missed school, and perhaps most significant of all, loss of employment."

In Krimstock, the court had cited with approval a Florida statute, providing the following procedures: notice within five working days, stating that the owner may request a preliminary hearing within 15 days; and a hearing within 10 days of such a request.

The Seventh Circuit did not require that Illinois afford these exact procedures. Instead, the court left it to the district court to fashion appropriate relief on remand: "The hearing should be prompt but need not be formal. We leave it to the district court to determine the notice requirement and what a claimant must do to activate the process."

In light of the decision, Wisconsin's procedures for forfeitures of drug assets will likely have to change, at least when an automobile is the asset seized.
...
Read entire law review article at:
http://www.wislawjournal.com/article.cfm/2008/05/12/Appellate-decision-leaves-states-seizure-practices-in-question-Court-Car-seizure-as-drug-asset-requi

Carvajal v. US, No. 06-55868 (2008)
The principles announced in US v. $227,000 US Currency, 69 F.3d 1491 (9th Cir. 1995), survive the enactment of the Civil Asset Forfeiture Reform Act of 2000 (CAFRA). Consequently, a ruling dismissing plaintiff's claim for interest on $75,800 in currency wrongfully seized by the government and then returned 10 months later, as well as a claim for attorney's fees, is reversed in part as to the claim for interest. Read more...
 
Excerpts:
...In $227,000, 69 F.3d at 1498, an opinion that predates the enactment of CAFRA by about 5 years, we held that sovereign immunity does not bar a claim against the United States for interest on wrongfully seized money. In reaching our conclusion, we acknowledged the general rule "that 'interest cannot be recovered in a suit against the government in the absence of an express waiver of sovereign immunity.' " Id. at 1493 (quoting Library of Congress v. Shaw, 4789 U.S. 310, 311 (1986)). But we characterized that rule as applicable to "inchoate interest, as an item of damages in a forfeiture action." Id. at 1497. By contrast, we explained, the payment of interest on wrongfully seized money is not a payment of damages, but instead is the disgorgement of a benefit "actually and calculably received from an asset that [the government] has been holding improperly. Id. at 1498. As a result, no express waiver of sovereign immunity was necessary, and the plaintiff was entitled to the payment of interest actually or constructively earned by the government during the period the asset was wrongfully held. Id.
 
The United States first requests that we read into $227,000, as the district court did, the requirement of a court order before interest accrues on improperly seized money. Under such an interpretation, Plaintiff would not be entitled to interest because the United States eventually returned Plaintiff's money without a court order. ...
 
Interest earned, whether actually or constructively, is part of the res that must be returned to the owner. Id. at 1496. Had the district court's order of the return of the money served as a trigger for a right to interest, we would have ruled in $227,000 that the plaintiff was entitled to interest from the date of that order. Instead, we held that the plaintiff was entitled to interest accruing from a date eight years earlier. Id. We reasoned from the common law: "If the government seized . . . a pregnant cow and was ultimately found not to be entitled to the cow after it had given birth, it could hardly be contended that the government had fulfilled its duty by returning the now-barren cow, but retaining the calf." Id. (footnote omitted). Thus, the plaintiff had a right to the interest even in the absence of a court order and, moreover, the right existed in the absence of an express waiver of sovereign immunity.
 
The United States' voluntary return of Plaintiff's $75,800, along with its concession that it did not have a right to the money, obviated the need for a court order to that effect. Under the government's rationale, the United States could avoid the disgorgement of interest--no matter how long it wrongfully held funds--by voluntarily returning seized money at the very last minute before such order is entered. ...
 
[[[ The United States next argued that CAFRA's 28 U.S.C. § 2465(b)(2)(A) supersedes $227,000 and does not provide for the return of interest in a case such as this, where the government declined to initiate judicial proceedings against the res, but failed comply with its obligation to return such property to its owner within the statutory deadline of 18 U.S.C. § 983(a)(3). --J.O.]]]
 
... Our holding is also consistent with the concerns expressed by Congress in CAFRA's legislative history. When it enacted CAFRA, Congress acknowledged a circuit split that arose in the wake of our decision in $227,000.* ... H.R. Rep. No. 106-192, at 19 nt. 79 (1999). Although Congress did not state that the legislation was resolving that split, it did find the denial of interest to a property owner who prevailed in a forfeiture action to be "manifestly unfair." Id. at 19.  The Sixth Circuit stated that CAFRA "ratified the outcome, if not the rationale" of our decision in $227,000. Permitting the United States to retain the proverbial calf would be inconsistent with our holding in $227,000...
 
Considering the text of CAFRA, the overall statutory scheme, and the legislative history, we hold that $227,000 remains good law. That being so, the district court improperly dismissed Plaintiff's claim for interest on the $75,800 seized by the United States."
* The Court noted: "With $227,000, we were the first circuit to weigh in on the question whether sovereign immunity bars the collection of interest on wrongfully seized money.  The Sixth and Eleventh Circuits followed our lead, while the First, Second, Eighth, and Tenth Circuits reached the opposite conclusion. ... "
U.S. 9th Circuit Court of Appeals, March 17, 2008
US v. Approximately 64,695 Pounds of Shark Fins, No. 05-56274
In a case arises from a civil complaint brought by the government for the forfeiture under the Shark Finning Prohibition Act of 64,695 pounds of shark fins owned by claimant and found on board a U.S. vessel, a judgment of forfeiture is reversed and remanded where neither the statute nor regulations provided fair notice to claimant that the vessel, which purchased the fins at sea from other vessels, would be considered a fishing vessel under 16 U.S.C. section 1802(18)(B). Read more...
U.S. 2nd Circuit Court of Appeals, February 26, 2008
Diaz v. US, No. 06-5301
Dismissal of claim for the return of cash that was seized and forfeited in connection with plaintiff's arrest for violating currency reporting laws is affirmed as the district court lacked subject matter jurisdiction because the claim is barred by sovereign immunity. Read more...

 


U.S. 1st Circuit Court of Appeals, February 25, 2008
US v. Cardona-Sandoval, No. 07-1748
Order denying a motion for the return of property seized at the time of defendant's arrest is vacated where the government's response to the motion was not adequate to support the district court's decision since: 1) the government's response failed to address the status of the property specified; 2) the government provided the court with no information identifying how and when defendant was notified of the property's impending destruction and given the opportunity to receive it; and 3) what assertions the government did make were not supported by evidence. Read more...

 

2nd Cir gives expansive reading to reach of criminal forfeiture:

U.S. 2nd Circuit Court of Appeals, January 30, 2008
US v. Schlesinger, No. 05-3021

Conviction on a variety of arson and fraud charges is affirmed over claim that 28 U.S.C. section 2461(c)(2005) did not authorize the criminal forfeiture of the proceeds of his mail and wire fraud offenses. Read more...

U.S. 9th Circuit Court of Appeals, December 21, 2007
US v. Plunk, No. 06-35269
In property forfeiture proceedings brought against defendant in connection with his conviction for drug-related offenses, a decision awarding defendant compensation in lieu of property to be returned under 28 U.S.C. section 2465 and calculating the amount due based on the sale proceeds of the property is affirmed where: 1) contrary to defendant's claim, section 2465 does not require that he receive consequential damages; and 2) there was no error in the lower court's calculation of damages. Read more...

 

U.S. 5th Circuit Court of Appeals, November 19, 2007
Bailey v. US, No. 07-40309
Dismissal of defendant's motion seeking the return of property seized from him at his arrest and a grant of the government's motion to dismiss are affirmed in part and reversed in part where: 1) under the circumstances, the government's written notice was reasonably calculated to provide defendant with notice and there was no due process violation arising out of the forfeiture; 2) however, there was a genuine issue of material fact as to whether the government has, or ever had, certain claimed monies, which were not forfeited, in its possession; and 3) to the extent defendant sought the return of additional personal property seized from him at his arrest, his claim was untimely. Read more...

Congratulations to FEAR president Brenda Grantland for another victory in
United States versus One Star Class Sloop named Flash II.
On October 1, 2007, the U.S. District Court of Massachusetts ruled that
her client's Star Class sloop "Flash II" (formerly owned by the late
President John F. Kennedy) is not subject to forfeiture at all.

Court rules sailbo