Opinion
Case No. 2:14-cr-107(1)
07-28-2014
UNITED STATES OF AMERICA, Plaintiff, v. CHRISTOPHER T. WOLFE, Defendant.
ORDER
This matter came on for consideration upon Defendant's Motion To Release Frozen Funds For Payment Of Attorney's Fees And For A Declaration That Assets So Used Are Exempt From Being Reclaimed From A Third-Party Transferee Through Post Conviction Forfeiture Pursuant To 21 U.S.C. § 853 (c) (ECF No. 39), filed on June 26, 2014, and upon the Governments Response In Opposition To Defendant's Motion To Release Frozen Funds For Payment Of Attorney's Fees (ECF No. 54), filed on July 7, 2014.
The facts of this matter have been described in some detail by Defendant and the Government in their briefing. The facts are summarized as follows: Defendant and others were being investigated by the United States Secret Service and the United States Department of Agriculture. The investigation involved activities that the Government claims formed the basis for criminal charges of conspiracy to defraud the United States, wire fraud, false claims, theft of public money, and money laundering. During the investigation, Special Agent Michael Hackney sought and received a federal seizure warrant for up to $300,000 in the trust account of Attorney Samuel B. Weiner, the attorney representing Defendant during the investigation. The federal seizure warrant claimed that money in the trust account was proceeds of and/or property involved in violations of the crimes of theft of public money, wire fraud, and money laundering. Magistrate Judge Norah McCann King found probable cause to believe the funds were forfeitable and authorized the seizure of up to $300,000 in the trust account. The bank informed the Special Agent that there was $235,006.03 in the trust account and that amount was ordered to be frozen on September 13, 2013, pursuant to 21 U.S.C. § 853(f). Six days later, on September 19, 2013, Magistrate Judge King met with counsel, at the request of attorney Weiner, and as a result of that meeting, Magistrate Judge King released $111,018 from the trust account that was the amount that attorney Weiner asserted he had expended on behalf of Defendant as of that date. Pursuant to that Order, the bank was required to freeze $188,982 in the account.
The Secret Service then commenced administrative forfeiture proceedings and both attorney Weiner and Defendant filed competing claims as the alleged lawful owners. On February 18, 2014, the Government filed a civil Complaint for Forfeiture and Defendant filed an Answer as a claimant and requested a stay pending resolution of the criminal investigation. The stay was ordered on April 5, 2014.
Then, on May 19, 2014, the federal grand jury returned a sixteen count Indictment charging Defendant and others with several federal crimes including Conspiracy to Commit Theft of Public Property, Theft of Public Money, Money Laundering, and Conspiracy to Commit Money Laundering. The Indictment also included a Forfeiture Count alleging that $188,982 seized from the trust account was subject to forfeiture as property directly traceable to the offenses charged. After the Indictment was filed in this Court, Defendant filed the Motion that is now before this Court.
Defendant argues that a hearing is necessary because the funds in the trust account are not traceable back to the alleged offenses in the Indictment. Defendant concedes that the United States Supreme Court has recently held in Kaley v. United States, 134 S.Ct. 1090 (2014), that a hearing is not permitted to contest a grand jury's determination that probable cause exists as to the commission of the alleged crimes. But, as Defendant points out in his Motion, that is not what he requests. Rather, Defendant demands a hearing on traceability of the funds.
The Government maintains that a hearing is not permitted. First, the Government argues that the Kaley decision forecloses any hearing on the probable cause determination made by the grand jury. And, by analogy, the Government argues that when a grand jury finds probable cause to include in an Indictment a forfeiture count, that determination also precludes a traceability hearing. Specifically, the Government maintains:
It stands to reason, that if a grand jury has the final word in finding probable cause as to the crimes alleged, then that principle extends to the same grand jury's finding of probable cause that the property at issue is proceeds traceable to the crimes alleged for the purpose of alleging forfeitures.(ECF No. 54, at Page ID #195.))
Unfortunately, the answer is not that simple, and the decision as to whether a hearing should be conducted on the traceability prong cannot be decided based upon the Kaley decision. Two footnotes in that decision point to that conclusion.
This Court begins with an analysis of Kaley v. United States. It is not argued by the parties and it is beyond dispute that the Kaley decision applies only to whether a Defendant is entitled to a hearing on the issue of probable cause to believe a crime has been committed. The United States Supreme Court held in Kaley that a grand jury determination of probable cause to believe that a crime has been committed forecloses any further hearing on that issue. The Government argues for an extension of that rule by indicating that it is logical to assume that when a grand jury includes a forfeiture count in an indictment it has found probable cause as to traceability and a hearing on that issue is also foreclosed.
The Government attempts to expand the decision too far. The majority opinion in Kaley specifically stated that it offered no opinion on whether a defendant has a constitutional right to a hearing on "whether probable cause exists to believe that the assets in dispute are traceable or otherwise sufficiently related to the crime charged in the indictment." Kaley, 134 S.Ct. at 1095. Additionally, as evidened by footnote number 9 to the majority opinion and footnote number 2 to the dissenting opinion, the Court had no intention of preventing such a traceability hearing, even when a forfeiture count is included in an indictment.
Footnote number 9 to the majority opinion recognizes that the traceability question is beyond the grand jury's core focus or function. The footnote states:
The dissent argues that the same is true when a judge hears evidence on whether frozen assets are traceable to a crime, because that allegation also appears in the indictment. But the tracing of assets is a technical matter far removed from the grand jury's core competence and traditional function - to determine whether there is probable cause to think the defendant committed a crime. And a judge's finding that assets are not traceable to the crime charged in no way casts doubt on the prosecution itself. So that determination does not similarly undermine the grand jury or create internal contradictions within the criminal justice system.Id. at 1099 (Citation omitted).
Footnote number 2 to the dissenting opinion, although critical of the majority opinion, recognizes that the grand jury is not equipped to find probable cause on the traceability issue. That footnote provides:
The majority's only response is to characterize the grand jury's finding of traceability as merely a "technical matter." Ante, at 1099, n. 9. But the indictment draws no distinction between the grand jury's finding of probable cause to believe that the Kaleys committed a crime and its finding of probable cause to believe that certain assets are traceable to that crime. Both showings must be made to justify a pretrial asset restraint under Monsanto, and there is nothing in that case or the indictment that justifies treating one grand jury findingId. At 1108 (Roberts, C. J., dissenting).
differently than the other.
Based upon the forgoing analysis, this Court finds that the Kaley decision does not prohibit a traceability hearing. In fact, the decision contemplates such a hearing, even if it does not opine on whether the hearing is constitutionally compelled. The question then is, what is the law in the Sixth Circuit governing a second-prong hearing on traceability. The answer is found in United States v. Jamieson, 427 F.3d 394 (6th Cir. 2005).
One of the issues in the Jamieson case before the trial court was whether a hearing should be conducted on the issue of frozen assets. The trial court followed the template set out by the Tenth Circuit in United States v. Jones, 160 F. 3d 641 (10th Cir. 1998), and the Sixth Circuit in Jamieson indicated that, "[W]e have no quarrel with the district court's decision to apply Jones. . . ." Jamieson, 427 F.3d at 407. The Sixth Circuit has, thus, adopted the rule in Jones. The test as set forth in Jones and subscribed to by the Sixth Circuit provides as follows:
On appeal, Jamieson's principal complaint is that the district court did not go beyond the allegations in the indictment and hold an adversarial hearing to determine whether there was probable cause to conclude that the assets were subject to forfeiture. In Monsanto, 491 U.S. at 615, n.10, 109 S.Ct. 2657, the Supreme Court specifically refrained from ruling on whether due process requires such a probable cause hearing to support restraint of assets prior to trial or whether the indictment is sufficient. Although we have never had the occasion to resolve this question in the Sixth Circuit, various other courts around the country have addressed it, with less than uniform results. The district court in this case followed the lead of the Tenth Circuit in United States v. Jones, 160 F. 3d 641 (10th th Cir. 1998), in which the court noted that "an adversarial hearing that occurs shortly after freezing assets would serve to diminish the risk of an erroneous deprivation at a meaningful time" but held that such a hearing is necessary only when the defendant can (1) "demonstrate to the court's satisfaction that she has no assets" and (2) "make a prima facie showing of the bona fide reason to believe the grand jury erred in determining that the restrained asset, 'constitute or are derived, directly or indirectly, from gross proceeds traceable to the commission of the offense.' " Id. at 646, 647. When the defendant makes the required showings, the burden then shifts to the prosecutionJamieson, 427 F.3d at 406.
to establish, by probable cause at an adversarial hearing, that the restrained assets are traceable to the underlying offense. Id. at 647.
Applying that test to the case sub judice, this Court finds that Defendant has failed to demonstrate that Defendant has no assets and has failed to make a prima facie showing that the grand jury erred in its finding that the proceeds in question are traceable to the alleged commission of the offenses charged. Defendant simply proclaims that the Government cannot trace the funds to the alleged offenses. More is needed than this unsupported statement to meet the Jamieson/Jones test.
Accordingly, the Court finds Defendant's Motion is not well taken and the Court DENIES the same. (ECF No. 39.)
IT IS SO ORDERED.
/s/ Gregory L. Frost
Gregory L. Frost
United States District Judge