Opinion
Civil Action No. 99-0584-CB-S
July 24, 2000
RELEASE AND SETTLEMENT OF ALL CLAIMS BETWEEN CLAIMANT VINCENT J. FLYNN AND THE UNITED STATES AND FINAL JUDGMENT OF FORFEITURE
This civil forfeiture action was brought by the United States seeking,inter alia, the forfeiture of $20,000.00 in drug proceeds transferred into Coconut Grove Bank Account No. 0129053506, held in the name of The Vincent J. Flynn Trust pursuant to Title 18, United States Code, Sections 981(a)(1)(A) and 984, which provide for the forfeiture of any property involved in or traceable to property involved in a violation of the anti-money laundering laws of the United States, namely, Title 18, United States Code, Sections 1956 and 1957. Vincent J. Flynn is the Claimant. Claimant is the holder of the referenced bank account. This case arises out of the laundering by individuals other than the Claimant of drug proceeds into Claimant's referenced bank account at the instruction of Colombian money brokers who work for Colombian narcotics trafficking cartels. Accordingly, the United States has probable cause to believe that the funds in the bank account are subject to forfeiture as property involved in a money laundering offense. The amount currently frozen by the bank is $20,000.00
The instant complaint was filed against numerous bank accounts, including the account referenced in the text. This settlement agreement applies only to the funds in the referenced account and not those funds frozen in other bank accounts subject to this action.
Explanation of the Colombian Black Market Peso Exchange
The facts of this case, as alleged by both sides, are entirely consistent with a common scheme for laundering dollar drug proceeds through what is known as the Colombian Black Market Peso Exchange. Under this scheme, Colombian money brokers facilitate the exchange of U.S. dollars and other currencies, principally Colombian pesos, between narcotics traffickers and Colombian citizens, businesses, and others, with the money broker earning a sizeable commission for his services. The scheme is successful because drug dealers hold large quantities of US. dollars derived from drug trafficking that they need to convert into local currencies for use in Colombia, while businesses, individuals and others in Colombia seek U.S. dollars for imported goods and services, offshore investments, or tax shelters, while avoiding Colombian governmental scrutiny, taxes, duties, red tape, and the less favorable exchange rates associated with "regulated" Colombian currency exchange mechanisms.
In Colombia the only way one can purchase foreign currency to pay for imported goods is through the "regulated" market, i.e., Colombian banks, savings and loans, and exchange houses licensed to engage in international wire transfers, and through special dollar denominated compensation accounts held in one's own name. One can also purchase foreign currency on the "non-regulated," "free," or "parallel" market through entities or individuals who are not permitted to engage in international wire transfers, but cannot do this to pay for imported goods. The "black market" refers to transactions that occur on the "non-regulated," "free," or "parallel" market that have indicia of illegal activity.
In a typical case, the broker seeks out or is approached by Colombian drug traffickers who hold drug proceeds in the form of U.S. dollars in the United States. The broker agrees to buy the drug dollars from the drug trafficker with local currency at a heavily discounted exchange rate. The broker then finds or is contacted by customers who seek U.S. dollars. The broker negotiates a dollar/peso exchange rate with his customers, usually at rates lower than the "regulated" currency exchange market rate, but higher than the broker paid for the dollars. The customer then tells the broker where the U.S. dollars thus purchased need to be sent or delivered.
Based upon the customer's instructions, the broker, sometimes in coordination with the drug trafficker, causes drug proceeds in the form of U.S. dollars to be wire-transferred to an account designated by the customer. Occasionally, this account is the customer's own account, but, more frequently, the customer designates the account of a fourth party, i.e., a U.S. provider of goods or services who has sold or provided such goods or services to the broker's customer that sent the customer an invoice, and is awaiting payment in U.S. dollars. Once the U.S. dollars have been sent to their destination, the broker will give the customer proof the dollars was sent, usually a copy of the wire-transfer request, and will ask that the customer pay him the equivalent in pesos at the previously negotiated exchange rate, which the broker will transfer, directly, or through intermediaries, to the drug trafficker, in accordance with the drug trafficker's instructions. Such peso payments may be in the form of cash, or in the form of checks made out to fictitious parties, checks in blank payee form, multiple checks in small denominations made payable to numerous payees, or in any combination of these forms, so that they are readily negotiable or the equivalent of cash and virtually untraceable.
As was the case in this matter, wire transfers constitute a common form of BMPE dollar payments, but dollars are also delivered to broker's customer, or to a fourth party designated by the broker's customer, in the form of cash and other negotiable instruments, such as cashier's check, postal orders, money orders, or personal checks endorsed in blank.
Thus, without using any formal currency exchange mechanisms, drug traffickers convert drug dollars they held in the U.S. into local currencies for use in Colombia, and Colombian businesses or individuals convert pesos into U.S. dollars that they then use to make investments or to satisfy debts owed to vendors of goods or services. That the overwhelming majority of U.S. dollars purchased through the "non-regulated," "free," or "parallel" exchange market involve drug proceeds is common knowledge throughout Colombia. Moreover, companies in the United States, Europe and elsewhere, who do a high volume of business in Colombia and other South American drug-source countries, know or should know about this underground method of obtaining U.S. dollars, particularly in instances where the payment on invoices for goods or services sold to Colombian customers comes not from the exporter's customer directly, but in the form of bulk cash payments in the U.S., the delivery of negotiable instruments made payable in bearer, blank, or third party endorsed form, or wire-transfers from bank accounts in the United States, or elsewhere, that are not in the exporter's Colombian customer's name.
The "Innocent Owner" Defense
Section 981(a)(2) protects "innocent owners" from the forfeiture of laundered drug proceeds. See United States v. All Monies, 754 F. Supp. 1467, 1473 (D. Haw. 1991) (drug money that has been purchased on the black market is forfeitable from the purchaser's bank account, unless the purchaser is an "innocent owner"); United States v. Basler, Turbo-67 906 F. Supp. 1332 (D. Ariz. 1995) (person who knows property was purchased with funds traceable to the black market in Colombia is not an innocent owner; that black market funds come from drug dealing is common knowledge in that country); United States v. Funds Seized From Account Number 20548408 at Baybank, N.A., 1995 WL 381659 (D. Mass. 1995) (wealthy Colombian who purchased 182 dollar-denominated money orders totaling $100,000 was innocent owner because he did not recognize structured nature of instruments). To satisfy the innocent owner defense, a claimant must prove "that he did not know of the illegal activity, did not willfully blind himself to the illegal activity, and did all that reasonably could be expected to prevent the illegal use" of his property. United States v. All Monies, 754 F. Supp. at 1478.
Position of the United States
The United States contends that Claimant knew, should have known, or was willfully blind to the fact that he was receiving funds through the Black Market Peso Exchange and that Claimant therefore would be unable to satisfy its burden of proof under Section 981(a)(2). The factors that should have put Claimant on notice that he was receiving funds subject to forfeiture include, but are not limited to, the following: 1) the payments were made via foreign accounts for a client charged and later found guilty of 146 counts of money laundering and who was shown at trial to have accepted at least $43,000,000 in cash from the Cali drug cartel, taking the cash to Israel, depositing it into an account at Israel Discount Bank, and disguising it as profits from a family jewelry business; and, 2) some of the funds came from a daughter of Elis Tisona who was also indicted but who fled and who was used by Tisona to deposit into banks cash collected on the streets of New York from cocaine sales.
Position of the Claimant
The Claimant contends that he is a bona fide purchaser or "innocent owner" of any drug proceeds wired into Coconut Grove Bank Account No. 0129053506. In particular, Claimant maintains that the drug proceeds he received were for legal services provided to Claimant's client Eli Tisona in United States v. Eli Tisona, Criminal No. 95-424-CR-Nesbitt (S.D.Fla.). Claimant further asserts that he did not know, had no reason to know, nor was willfully blind to the fact that funds wired into Coconut Grove Bank Account No. 0129053506 for the benefit of his client, Eli Tisona, were the proceeds of drug trafficking or were involved in a money laundering offense.
Agreement of the Parties
Accordingly, Claimant and the United States (hereinafter "the parties"), under the sound policy of law favoring settlement, without adjudication of any issue of fact or law and, sharing the goal of insuring that legitimate services and banking channels are not utilized by drug traffickers and drug organizations to launder their illegal proceeds from drug transactions, hereby agree to enter into this Release and Settlement of All Claims.
THEREFORE, on the joint motion of the parties it is hereby ORDERED, ADJUDGED, AND DECREED:
Upon agreement of the parties the Court HEREBY FINDS:
1. The term "Claimant" as used herein means Vincent J. Flynn, attorney at law;
2. The Complaint filed in this action states a claim upon which relief may be granted against defendant property, to wit, $20,000.00 of the funds in Coconut Grove Bank Account No. 0129053506. Process was fully issued as to defendant property and all identifiable individuals and entities that may have a claim to or cognizable property interest in the seized monies have been served and have had constitutionally adequate notice and time in which to file a claim and an answer. This Court has jurisdiction over the parties and the defendant property;
3. The parties hereto have entered into this Release and Settlement of All Claims and stipulated to the entry of a Final Judgment of Forfeiture as to $1,000.00 from the account freely and without coercion. The parties to this settlement agreement further acknowledge that they have read the provisions of same, that they fully comprehend its provisions, and agree to them. The parties further stipulate that this Release and Settlement of All Claims embodies all of the agreements between the parties and that the parties have not relied upon any representation or statement not included herein;
4. This Release and Settlement of All Claims resolves all issues raised by the United States in its Complaint as to the defendant property and the parties accept this Release and Settlement of All Claims as final and binding as to all issues raised by the United States in its Complaint as to the defendant property;
5. Claimant agrees and stipulates to the forfeiture of $1,000.00 of the funds in Coconut Grove Bank Account No. 0129053506, and the United States agrees and stipulates to the unfreezing and return of the remaining funds in the account.
6. Upon entry of this Consent Decree, the amount of $1,000.00 is to be deducted from Coconut Grove Bank Account No. 0129053506 and, at the expense of Claimant, said funds, by way of certified check, are to be mailed to the United States Customs Service (USCS) as follows:
United States Customs Service Fines, Penalties Forfeitures Post Office Box 2748 Mobile, Alabama 36652
7. The parties hereby waive all rights to appeal or to otherwise challenge or contest the validity of this Release and Settlement of All Claims.
UPON THESE AND THE BELOW ACKNOWLEDGMENTS AND STIPULATIONS IT IS HEREBY ORDERED, ADJUDGED AND DECREED:
1. The amount $1,000.00 of the funds in Coconut Grove Bank Account No. 0129053506 is hereby forfeited to the United States for disposition according to law. All remaining sums in Coconut Grove Bank Account No. 0129053506 are returned to Claimant and are hereby released from any arrest warrant in rem issued by this Court;
2. Claimant acknowledges that he has been made aware of the operation of a money laundering system known as the Black Market Peso Exchange and the role that system plays in the laundering of drug proceeds that are in the form of U.S. dollars. Claimant also acknowledges that he has been made aware of the role that providers of legal services, including the Claimant, can unwittingly play in the consummation of such money laundering offenses whey they accept payment in the form of U.S. dollars from third parties whose background of which they are unaware or accept payments in forms identified as having the indicia of Black Market Peso Exchange transactions
3. Claimant covenants and agrees to and do hereby forever release, save and hold harmless the United States and its officials, officers, employees, and agents from any claim, liability, obligation, appeal, action or demand, known or unknown, existing or arising in the future brought by any person or entity, in connection with, arising out of, or incident to all property arrested and/or seized, and/or forfeited from Coconut Grove Bank Account No. 0129053506 held in the name of The Vincent J. Flynn Trust.
4. Claimant agrees this Release and Settlement of All Claims does not entitle it to seek or to obtain attorney's fees as a prevailing party under the Equal Access to Justice Act, Title 28, United States Code, Section 2412, and Claimant, further waives any rights to attorney's fees, costs, and expenses that may arise under said provision of law or any other provision.
5. Claimant expressly waives any claim or right of action it may have against the United States, or any of its agencies, departments, employees or agents, for violation of its Constitutional, statutory, or personal rights, which may entitle it to collect pecuniary or punitive damages, attorney's fees, or costs, including, but not limited to, actions pursuant to Title 42, United States Code, Section 1983, the Federal Torts Claims Act, or any cause of action for the violation of any Constitutional or statutory rights. As to any possible tax obligations owed to the United States, the terms of this settlement agreement do not affect the tax obligations, tax fines, tax penalties, or any other tax obligations that Claimant may owe the United States government.
6. The parties stipulate that pursuant to Title 28, United States Code, Section 2465, a Certificate of Reasonable Cause may be entered by the Court.
7. Vincent J. Flynn agrees that this Release and Settlement of All Claims and Final Judgment of Forfeiture embodies and constitutes complete disposition and resolution of this forfeiture action and any other challenge to any administrative, civil or criminal forfeiture action and that the United States shall have no other, further, or additional obligation or liability to the signatories to this document except as herein provided.
8. The undersigned hereby declare that the terms of this document have been completely read and are fully understood and voluntarily accepted.