Opinion
Docket Number: CRIMINAL NO. 98-189 (HL)
May 16, 2000.
U.S. Attorneys' Office, Appellant Counselors.
Juan R. Acevedo-Cruz, Home Mortgage Plaza, dft represent by Acevedo-Cruz.
Francisco Acevedo-Padilla, Acevedo Law Office, Edif. Asociacion de Maestros, dft represent by Acevedo-Padilla.
Francisco Acevedo-Padilla, Acevedo Law Office, Edif. Asociacion de Maestros, dft represent by Acevedo-Padilla.
Jose R. Aguayo, dft represent by Aguayo.
Bruce Alter, dft represent by Alter.
Rafael Anglada-Lopez, dft represent by Anglada-Lopez.
Marlene Aponte-Cabrera, dft represent by Aponte-Cabrera.
Maria T. Arsuaga, Federal Public Defender Office, dft represent by Arsuaga.
Donald I. Bierman; Bierman, Shohat, Loewy Klein, ip represented by Bierman.
Donald I. Bierman; Bierman, Shohat, Loewy Klein, ip represented by Bierman.
Donald I. Bierman; Bierman, Shohat, Loewy Klein, ip represented by Bierman.
Rachel Brill, Mercantil Plaza Building, ip represented by Brill.
Rachel Brill, Mercantil Plaza Building, ip represented by Brill.
Rachel Brill, Mercantil Plaza Building, ip represented by Brill.
Rachel Brill, Mercantil Plaza Building, ip represented by Brill.
Rachel Brill, Mercantil Plaza Building, ip represented by Brill.
Jason R. Burke, Kunz and Opperman, ip represented by Burke
C.A. Truck Parts, c/o Bruce A. Alter. Esq., ip represented by C.A. Truck Parts (Pro Se)
Graham A. Castillo-Pagan, Home Mortgage Plaza, dft represented by Castillo-Pagan
Graham A. Castillo-Pagan, Home Mortgage Plaza, dft represented by Castillo-Pagan
Rafael F. Castro-Lang, dft represented by Castro-Lang
Rafael F. Castro-Lang, dft represented by Castro-Lang
Jose R. Cintron-Colon, Ext. Parkville, Wilson N-6, ip represented by Cintron-Colon
Yolanda A. Collazo-Rodriguez, dft represented by Collazo-Rodriguez
Ramon F. Dapena, Goldman Antonetti Cordova, ip represented by Dapena.
Hector A. Deliz, Deliz Torres Gonzalez, dft represented by Deliz
Hector R. Diaz-Olmo, dft represented by Diaz-Olmo
Jorge L. Diaz-Reveron, Capital Bldg. South Tower, dft represented by Diaz-Reveron
Juan F. Doval, Bankers Finance Tower, ip represented by Doval
Ignacio Fernandez-De-Lahongr, Centrum Plaza, dft represented by Fernandez-De-Lahongr
Jorge A. Fernandez-Reboredo, dft represented by Fernandes-Reboredo
Veronica Ferraiuoli-Hornedo, McConnell Valdes, ip represented by Ferraiuoli-Hornedo
Sam S. Fields, Ruden. McClosky, Smith Schuster Russell, dft represented by Fields
Fortuity Int'l, BIERMAN, SHOHAT, LOEWY . . . Ira N. Loewy, Esq., ip represented by Fortuity Int'l (Pro Se)
Ramon L. Garay-Medina dft represented by Garay-Medina
Julio E. Gil-De-La-Madrid, Calle Marginal A-11 (Granada), ip represented by Gil-De-La-Madrid
Sharon R. Glazier, White Case LLP, First Union Financial Center, dft represented by Glazier
Ramon M. Gonzalez-Santiago, dft represented by Gonzalez-Santiago
Ernesto Hernandez-Milan dft represented by Hernandez-Milan
Intermark Industries, c/o Dennis N. Urbano, Esq., ip represented by Intermark Industries (Pro Se)
Marcos D. Jimenez, White Case LLP, First Union Financial Center, ip represented by Jimenez
Marcos D. Jimenez, White Case LLP, First Union Financial Center, ip represented by Jimenez
Jorge R. Jimenez-Artigas, Bankers Finance Tower, ip represented by Jimenez-Artigas
Kirk N. Kirkconnell, ip represented by Kirkconnell
Desiree Laborde-Sanfiorenzo, U.S. Attorney's Office Criminal Division, pla represented by Laborde-Sanfiorenzo
Joseph C. Laws, Federal Public Defender Office, dft represented by Laws
Lydia Lizarribar-Buxo, dft represented by Lizarribar-Buxo
Felix J. Lopez, White Case LLP, First Union Financial Center, ip represented by Lopez
Felix J. Lopez, White Case LLP, First Union Financial Center, dft represented by Lopez
Francisco M. Lopez-Romo, dft represented by Lopez-Romo
Laura Maldonado-Rodriguez, dft represented by Maldonado-Rodriguez
Michael F. McAuliffe, Holland Knight LLP, ip represented by McAuliffe (Pro Se)
Bruce J. McGiverin, Mercantil Plaza Building, dft represented by McGiverin
James McGuirk, dft represented by McGuirk
Teodoro Mendez-Lebron, dft represented by Mendez-Lebron
Robert W. Odasz, dft represented by Odasz
Jose A. Pagan-Nieves, dft represented by Pagan-Nieves
Jorge E. Perez-Diaz, Pietrantoni Mendez Alvarez Banco Popular Center, ip represented by Perez-Diaz
Carlos Perez-Olivo, dft represented by Perez-Olivo
Luis Fernando Pradilla, Museo de La 84 Ltda., ip represented by Pradilla (Pro Se)
Edwin Quinones, Axtmayer, Adsuar, Muniz Goyco, ip represented by Quinones
Edwin Quinones, Axtmayer, Adsuar, Muniz Goyco, ip represented by Quinones
Antonio Juan Ramirez-Aponte, McConnell Valdes, ip represented by Ramirez-Aponte
Miriam R. Ramos-Grateroles dft represented by Ramos-Grateroles
Hector Reichard-Jr., Reichard Escalera, ip represented by Reichard-Jr.
Ignacio Rivera-Cordero, Rivera Montalvo, ip represented by Rivera-Cordero (Pro Se)
Raymond Rivera-Esteves, dft represented by Rivera-Esteves
Johnny Rivera-Gonzalez, El Monte Mall, dft represented by Rivera-Gonzalez
Jorge E. Rivera-Ortiz, dft represented by Rivera-Ortiz
Edgardo L. Rivera-Rivera dft represented by Rivera-Rivera
Juan P. Rivera-Roman dft represented by Rivera-Roman
Heidi L. Rodriguez-Benitez, Pietrantoni Mendez Alvarez Banco Popular Center, ip represented by Rodriguez-Benitez
Benito I. Rodriguez-Masso, dft represented by Rodriguez-Masso
S.B. Used Truck Part, Terence Lenamon, Esq., ip represented by S.B. Used Truck Part (Pro Se)
Maria H. Sandoval, dft represented by Sandoval
Jesus Santiago-Malavet, dft represented by Santiago-Malavet
Olga M. Shepard-De-Mari, dft represented by Shepard-De-Mari
Jose A. Suarez-Santa, dft represented by Suarez-Santa
Patricia H. Thompson, Carlton, Fields, Ward, Emmanuel, Smith Cutler, P.A. Bank of America at Int'l Place, dft represented by Thompson
Irma R. Valldejuli-Perez, dft represented by Valldejuli-Perez
Daniel E. Waltz, Patton Boggs LLP, ip represented by Waltz
John Ward-Llambias, dft represented by Ward-Llambias
REPORT AND RECOMMENDATION
Several motions have been filed by Dr. Hernando Marquez-Aristizabal, Sumidata, Inc., Advance International System D/B/A Compumax, Inc., Microlnformatica, Inc., Fortuity International, Inc., DOS International, Inc., Ocean Bank, Bishop Diesel parts, Inc., and Bishop Truck Parts, Inc. (D.E. #541, 558, 589, 592, 589, 533, 558, 608, 627, 628, 724, 744). The government had filed its opposition. (D.E. #560, 598). A hearing had been requested, to which other similarly situated third party claimants all related to codefendant Roberto Ferrario-Pozzi have also sought modification of the restraining order (D.E. #674, 678, 813, 816, 824). See also D.E. #560, 589, 592, 596, 602), to which Canada Packers (USA), Inc., Memory Systems, Corp., Brookfield Automotive Export Co., C.A. Truck Parts, Inc., Julio E. Valbuena, and Intermark Industries, Inc., joined and were present at the hearing before this magistrate. (D.E. #862, 863, 864, 865, 867).
Claimants' petition and background of referred motions:
On December 8, 1998, a federal Grand Jury returned a Superseding Indictment against thirty one (31) co-conspirating defendants charging violations of 21 U.S.C. § 846 (conspiracy to possess and distribute narcotics), 21 U.S.C. § 960 (conspiracy to import narcotics), 18 U.S.C. § 1956(h) (conspiracy to commit money laundering) and 18 U.S.C. § 952 (criminal forfeiture). On December 8, 1998, the court issued a restraining order for bank accounts where the government has claimed codefendant Ferrario-Pozzi had wired funds and upon which third-party claimants' assets were frozen.
As such, it is the government's contention that there being a forfeiture count as to defendant Roberto Ferrario-Pozzi for the monies that were seized when wire transferred to claimants, in addition to a pending criminal prosecution, none of claimants' issues may be entertained until such time said defendant is convicted. Nevertheless, defendant Ferrario-Pozzi is located somewhere in Colombia and is no where in a foreseeable future to be returned or located within the United States.
The government has obtained a seizure warrant at the time of return of the indictment in December 8, 1998, and on such grounds third parties to the seized monies should wait for an order of forfeiture before they can intervene in the criminal forfeiture action. 18 U.S.C. § 982.
The government's only offer to these third-party claimants have been the release of 10 percent of assets seized upon their agreement to forfeit 90 percent without further recourse. Hearing held before this Magistrate on May 2, 2000:
It was the government's averment at the hearing that extradition documents as to defendant Ferrario-Pozzi were filed with the government of Colombia in May 1999 and supposedly should be heard by a court therein without any actual assurance as to its outcome. No evidence was present indicating that said foreign authorities will in effect extradite Ferrario-Pozzi. There is no certainty that this defendant will ever return to this jurisdiction. The government further indicated that it has no explanation to sustain the criteria used for the 10 percent offer to release claimants' assets. The negotiations were held with AUSA Novas from the Civil Division and AUSA Javier Santos Mimoso was not aware of the extent of such regulations.
During the hearing, and even after a recess was granted as requested by the government's, the contention was that it need not present any evidence or proffer since it was solely for claimants to prove that their due process was being violated by the seizure. The government also stated that claimants had available the options to provide security with letters of credit or performance bond which was enough relief until such time as ancillary proceedings, after conviction of defendant Ferrario-Pozzi, were to be held. The government had no reply nor argumentation on whether the sixteen (16) months that have elapsed since the seizure, together with the undetermined date of defendant's apprehension, could provide sufficient uncertainty to consider such a delay a violation of due process.
21 U.S.C. § 853(k) provides:
(k) Except as provided in subsection (n) of this section, no party claiming an interest in property subject to forfeiture under this section may —
(1) intervene in a trial or appeal of a criminal case involving the forfeiture of such property under this subchapter; or
(2) commence an action at law or equity against the United States concerning the validity of his alleged interest in the property subsequent to the filing of an indictment or information alleging that the property is subject to forfeiture under this section.
The record is clear that movants do not challenge the probable cause determination. Notwithstanding, this magistrate went to the extent of examining in-camera the grand jury minutes, as well as the attached affidavit to the seizure warrant to sustain the probable cause for the issuance of said warrant (D.E. # 724, 744). The assets seized is not real estate that could be subject to restrain without significant detriment to claimants.
Proceedings:
The government failed and refused to come forward with any evidence or proffer to rebut claimant's allegations that on inordinate delay has ensued. Neither was this magistrate placed in a position to disbelieve claimants will be able, when and if an ancillary proceeding ever take place, to establish that they are innocent third parties. The risk of erroneous deprivation of property is significant even at the ancillary proceedings stage. The government has already been provided by discovery, has interviewed claimants' officers, obtained documentation from their representatives and held meetings to be able to ascertain their position. The government criminal case has been fully developed since all defendants, except for Ferrario-Pozzi, have pleaded guilty and have been provided with ample discovery. As such, in the instant case, there is no predicament that the government's criminal case could be compromised by entertaining third-party claimants' request. No countervailing govemment's interest was prompted. Still, even if discovery could be an issue, the court retains the discretion to limit and manage discovery as the interest of justice requires. Degen v. United States, 517 U.S. 820, 116 S.Ct. 1777 (1996).
Even if not so, fair procedures are not confined to the innocent.
The government did not argue as to the existence and conditions regarding the extradition treaty with Colombia. The status of defendant Ferrario-Pozzi's detention at the country of origin, when and if such an extradition hearing will be entertained by Colombian courts or even if there would be a reply to the filing of extradition documents is presently unknown.
International Covenant on Civil and Political Rights, 999 U.N.T.S. 171, 6 I.L.M. 368 (1967) (ICCPR).
The treaty between United States and Colombia was entered on September 14, 1979, ratified by Law 27 of 1980 by Colombia and by the United States on November 20, 1981. In 1986, the Colombian Supreme Court held Law 27 unconstitutional and the treaty remained inapplicable until 1989, when the President of Colombia, under martial law authority, issued Decree No. 1860 to provide for extradition of Colombian and foreign nationals sought for narcotic and trafficking offenses, within certain proceedings. The United States entered the ICCPR into force in September 9, 1992.
The government has not attempted to exercise at the hearing even a minimal effort to rebut the nature of the third innocent party claims and/or the bona-fide business status of these third party claimants nor submitted even a proffer that would link claimants with knowledge or participation in the illegal nature of the funds with which they were to be paid for their goods, except for its full reliance in the return of an indictment against defendant Ferrario-Pozzi. The hearing for modification of the seizure order is not akin to ancillary proceedings, claimed by the government as the sole relief available to these third-party claimants. Due process requires post-restraint, pretrial hearing upon certain showing by defendants. U.S.C.A. Const. Amend. 5.United States v. Jones, 160 F.3d 641 (10th Cir. 1998). The legislative history supports for such pre-trial hearings, without challenges to the validity of the indictment. S. Rep. No. 98-225, 203, 213 (1984), reprinted in 1984 U.S. Code Cong. Ad. News 3182, 3386, 3396.
Furthermore, the civil forfeiture statutes, which is very similar to the one under consideration, have been used to construe criminal forfeiture provisions. United States v. Libretti, 38 F.3d 523, 528 n. 6 (10th Cir. 1994), aff'd 516 U.S. 29, 40, 116 S.Ct. 356, 363 (1995). One must not lose sight of the pending legislation to amend in order to curb seizure of property by federal agents. See H.R. 1658 to provide more just and uniform procedure for federal civil forfeitures.
Quoting Caplin Drysdale, Chartered, v. United States, 491 U.S. 617, 635, 109 S.Ct. 2646, 2657 (1989) wherein "cases involving particular abuses can be dealt with individually by the lower courts when (and if) any such cases arise."
Civil Asset Forfeiture Reform of 2000, 107th Cong. (1999); 146 Cong. Rec. S1753 (daily ed. March 27, 2000) (statement of Sen. Leahy).
Legal Arguments:
The Due Process and Equal Protection Clauses protect individuals from sanctions which are downright irrational. Hudson v. United States, 522 U.S. 93, 118 S.Ct. 488 (1997). United States v. Ward, 448 U.S. 243, 100 S.Ct. 2636 (1980) examines whether the sanction is so grossly disproportionate to the harm causes it to constitute punishment.
"No person shall . . . be deprived of life, liberty, or property, without due process of law." U.S. Const. Amend. V.
There is a danger of overreaching when one branch of the Government, without benefit of cooperation or correction from the others, undertakes to define its own authority. In an ordinary case a citizen has a right to a hearing to contest the forfeiture of his property in fulfillment of the Due Process Clause. United States v. James Daniel Good Real Property, 510 U.S. 43, 48-62, 114 S.Ct. 492 (1993). Cf. Bennis v. Michigan, 516 U.S. 442, 116 S.Ct. 994 (1996) (a state nuisance abatement statute, without an offset for the interest of an innocent co-owner, did not offend federal due process). The forfeiture of property for an illegal activity serves as a deterrent purpose distinct from any punitive purpose since by imposing economic penalty for illegal use of property renders the illegal behavior unprofitable. This reasoning cannot account for deprivation of a third party claimant of any meaningful and reasonable timely opportunity to contest the seizure of assets, when a legitimate venture, conducted in the general course of a business, such as sale of equipment, machinery or goods, is conducted, the items are delivered and the wire transfer of monies in payment thereof are subsequently seized. The government's recourse to criminal instead of civil forfeiture cannot abridge the constitutional rights of individuals.
"The practice of ex-parte seizure, moreover, creates an unacceptable risk of error. Although Congress designed the drug enforcement for forfeiture statute to be a powerful instrument in enforcement of the drug laws, it did not intend to deprive innocent owners of their property." United States v. James Daniel Good, supra.
Under a fugitive disentitlement doctrine the owner's claim to properties was denied by the court. The Supreme Court reversed and remanded this civil forfeiture decision. Degen v. United States, 517 U.S. 820, 116 S.Ct. 1777 (1996). It examines that such action amounts to foreclosure of the claim on the merits. As a recourse, the forfeiture can be held in abeyance for an indefinite time.
See United States v. Real Property in Waterboro, 64 F.3d 752 (1st Cir. 1995), where third-party claims, without a forfeiture notice or proceeding, were held premature. In said case, claimant was thereafter considered a straw buyer of the real estate property at issue and the defendant, upon conviction, was to testify as to these facts. See United States v. Cunan, 156 F.3d 110 (1st Cir. 1998); United States v. Decato, 1997 WL 136339 (D. Mass. 1997). United States v. Harvey, 814 F.2d 905, 929 (4th Cir. 1987) (due process violation considered when post-indictment ex-parte restraining order issued without opportunity for post-restraint hearing other than the criminal trial itself); United States v. Crozier, 777 F.2d 1376, 1382-1384 (9th Cir. 1985). See Teresia B. Jovanovic, Ann. Delay Between Seizure of Personal Property by Federal Government 69 ALR Fed. 373 (1984).
Recommendation for relief:
A modification of the seizure order would be appropriate relief in the instant case. There is no showing of good faith settlement attempts by the government, no foreseeable solution to the inordinate delay in the criminal proceedings at the present, and no reasonable expectation that it be resolved in the near future nor any certain date. The claimants have established, and was not rebutted by the government, the damages these are suffering by the costs incur in continuing the performance bond as to those instances when such an action has been feasible. The private interest at issue of a third-party claimant in this case is significantly over $3,803,000. Thus, it could be reasonable to consider that the government's estimated percentage for release of property may likewise be assigned by the court and be as good as the government's proposed formula of 10 percent release and 90 percent seizure. Under the set of facts and circumstances presented to this magistrate it would be evidently more equitable, to recommend that 75 percent of the assets seized from the movants be released until the final seizure under ancillary proceedings are held or when the court may determine that the delay has been so excessive as to become punitive. This recommendation is made considering that the government did not avail itself of the opportunity to present any evidence to sustain its position thus precluding judicial review until such time, if ever, it would be willing to place the court in a position to entertain ancillary proceedings. Such judicial limitations to construe the forfeiture statutes would preempt the basic guarantees of constitutional rights.
The construction of the seizure provisions are to be liberally construed to effectuate its remedial purposes. 21 U.S.C. § 853(o).
"Broad forfeiture provisions carry the potential for government abuse and can be devastating when used unjustly." Caplin, supra.
". . . a sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retribution or deterrent purposes, is punishment . . . ." United States v. Halper, 490 U.S. 435, 448, 109 S.Ct. 1892, 1902 (1989).
It is thus recommended that the seizure order be modified accordingly as to movants and third-party claimants.
The parties have five (5) days to file any objections to this report and recommendation. Failure to file same within the specified time waives the right to appeal this order. Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir. 1994); United States v. Valencia, 792 F.2d 4 (1st Cir. 1986).
IT IS SO RECOMMENDED.