Opinion ID: 3012321
Heading Depth: 2
Heading Rank: 2

Heading: The Government’s Showing of Probable Cause.

Text: 18 U.S.C. S 1955(b)(1)(i) first looks to relevant state law to _________________________________________________________________ et seq. (West 1981 & Supp. 1984). Congress engrafted an ‘innocent owner’ defense to forfeiture under SS 881(a)(4), (6) and (7).’  United States v. One 1973 Rolls Royce, 42 F.3d 794, 799 (3d Cir. 1994). 8. But see Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 689 (1974), suggesting in now-famous dicta that Fifth Amendment just compensation concerns might preclude a judge from ordering forfeiture if the owner proves ‘he was uninvolved and unaware of the wrongful activity, but also that he had done all that reasonably could be expected to prevent the proscribed use of his property.’  United States v. On Leong Chinese Merchants Ass’n Bldg., 918 F.2d 1289, 1293 n.3. (7th Cir. 1990). 9 determine whether a given activity constitutes gambling. Here, the alleged illegal activity occurred in New Jersey. Therefore, [t]he relevant burden of proof requires merely that the government establish probable cause to believe that [New Jersey] gambling laws were being violated. On Leong, 918 F.2d at 1293. The relevant New Jersey law here is set forth at N.J.S.A. 2C:37-2. That statute makes it a crime to engage in promoting gambling, and provides that: [a] A person is guilty of promoting gambling when he knowingly: (1) Accepts or receives money or other property, pursuant to an agreement or understanding with any person whereby he participates or will participate in the proceeds of gambling activity; or (2) Engages in conduct, which materially aids any form of gambling activity. Such conduct includes but is not limited to conduct directed toward the creation or establishment of the particular game, contest, scheme, device or activity involved, toward the acquisition or maintenance of premises, paraphernalia, equipment or apparatus therefor, toward the solicitation or inducement of persons to participate therein, toward the actual conduct of the playing phases thereof, toward the arrangement of any of its financial or recording phases, or toward any other phase of its operation. N.J.S.A. 2C:37-2a(1), (2) (emphasis added). Moreover, gambling is defined to include staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under the actor’s control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome. N.J.S.A. 2C:37-1b. Given the breadth of this definition, we agree that the government clearly established probable cause to believe that IFS-NJ was promoting gambling in violation of New Jersey law by materially aiding Bowman’s gambling enterprises.9 IFS-NJ was a integral component of Bowman’s gambling enterprise. It received funds from bettors _________________________________________________________________ 9. As noted earlier, see supra n.1, the government and the Claimants stipulated that the facts are as stated in the government’s first amended complaint. 10 throughout the United States and processed those transfers so that the bettors could open accounts and place bets with ASL and other Bowman companies. It sent Bowman an hourly accounting of these funds. This allowed Bowman to monitor betting income and it also allowed bettors to call ASL and Bowman to confirm their deposits and place bets. IFS-NJ was also part of the payout mechanism that ensured that winning bettors collected on their wagers. IFSNJ clearly [e]ngage[d] in conduct, which materially aid[ed] . . . gambling activity. Its conduct was directed . . . toward the arrangement of [the gambling activity’s] financial or recording phases. N.J.S.A. 2C:37-2a(2). Even though the stipulated facts support the legal conclusion that IFS-NJ promoted gambling under New Jersey law, Claimants nonetheless argue that the government failed to establish probable cause. They argue instead that the seizure and forfeiture here represent[ ] a prosecutorial excess. Claimants’ Br. at 11. Their argument is largely based upon the generally accepted conflict of laws principle that a gambling transaction occurs in the country where the bet or wager is accepted. Id. at 13-14 (quoting Dicey & Morris, The Conflict of Laws 1468 (1993)). They insist that the gambling transactions here actually occurred in England where the bets were ultimately accepted. Claimants insist that there was no illegal gambling activity at all in this case because gambling is legal in England, and all of the actors there were legally licensed to conduct a gambling business. According to Claimants, IFS-NJ merely performed a facially, neutral, ministerial function in the United States. Id. at 10. They attempt to buttress this claim by reminding us that IFS-NJ was not open to the public, listed in any telephone directory, or identified in any advertising material as a place where bets could be placed. They are also quick to point out that the company’s operations did not include fixing odds, declaring winners or losers, or accepting or relaying bets or wagers. Id. at 5, 12. Claimants largely rest this argument on three cases which we will discuss in turn.10 _________________________________________________________________ 10. Claimants cite a host of cases from various states dealing with gambling. However, we do not believe that any of them are helpful for the 11 The first is State v. Andreano, 285 A.2d 229 (N. J. App. Div. 1971). There, the defendant was charged with bookmaking and gambling in violation of New Jersey law. His defense at trial was that he was not a bookmaker at all. Rather, he argued that he was simply acting as a messenger who took others’ bets to a legal, in-state parimutuel race track as a favor. The trial judge instructed the jury that under the New Jersey law, bookmaking occurs whenever an individual accepts a bet from another with the intent of subsequently placing the bet at a pari-mutuel race track, irrespective of whether that individual acts only as a conduit and does not benefit from the transaction. On appeal, the Appellate Division reversed the conviction based upon that instruction. That court held that when the bet is taken by a disinterested individual for placement at a lawful race meeting, such activity is not bookmaking within the statutory prohibition. Id. at 231. Claimants contend that, under Andreano,mere[ly] handling . . . funds, [which are] destined for a lawful location inside or outside the State, does not constitute an unlawful gaming activity. Claimants’ Br. at 23. Since IFSNJ only transferred funds to England, where the relevant parties were duly licensed and gambling is legal, Claimants insist that IFS-NJ could not have engaged in illegal gambling activity under New Jersey law. However, Claimants’ reading of Andreano is far too narrow. Andreano was charged with bookmaking, and the government here is not claiming that IFS-NJ’s operations constituted bookmaking under New Jersey law. Moreover, the statute under which Andreano was charged has since been repealed. That earlier statute did not prohibit promoting gambling as current law does. The government’s forfeiture claim rests upon an assertion that IFS-NJ promoted gambling as currently defined in N.J.S.A. _________________________________________________________________ simple reason that the government’s seizure and forfeiture is predicated upon its claim that IFS-NJ violated New Jersey statutory law. Thus, the issue is whether the government had probable cause to believe that IFSNJ’s activities promoted gambling as defined in the New Jersey statute, not whether the government had probable cause to believe that IFS-NJ’s operations would have been illegal under British law. 12 2C:37-2, and Andreano does not assist the Claimants in that regard.11 The second case Claimants rely upon is United States v. Truesdale, 152 F.3d 443 (5th Cir. 1988). The gambling operation in Truesdale was strikingly similar to the operation here. There, World Sportsbook (WSB) operated a gambling business in the Dominican Republic, Jamaica, and in Dallas, Texas. Its operations were legal in Jamaica and the Dominican Republic. Bettors placed bets by calling WSB’s Jamaican and Dominican offices, and those offices accepted and processed the wagers. Bets could only be placed via offshore telephone numbers. However, WSB opened accounts by sending funds to its Dallas office via Western Union wire transfer or overnight delivery. WSB employees in the Dallas office received these funds and deposited them into various bank accounts in and around Dallas for WSB. The federal government successfully prosecuted WSB’s Dallas employees for illegal gambling in violation of 18 U.S.C. SS 1955 and 1955(b)(1)(i). The government charged that the employees were guilty of bookmaking, under Texas Penal Code S 47.01(2)(A)-(C), and that this constituted a violation of S 1955. Section 47.01(2)(A)-(C) of the Texas Penal Code made it a crime to receive, record, or forward: (1) more than 5 bets or offers to bet in a day; or (2) more than $1,000 in a day; or (3) to scheme to receive, record, or forward a bet or an offer to bet. However, the Court of Appeals for the Fifth Circuit reversed the defendants’ convictions. The court held that there was _________________________________________________________________ 11. Claimants argue that Andreano is still significant because even though the statue Andreano was charged with violating was repealed, it was replaced by the statute at issue here. Claimants maintain that we should be guided by the repealed bookmaking statute when interpreting N.J.S.A. 2C:37-2. Reply Br. at 9. This argument ignores the fact that the relevant statute in Andreano did not prohibit promoting of gambling, and we certainly cannot ignore the difference in the language between the old and new statutes. The starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive. Temple Univ. v. United States , 769 F.2d 126, 132 (3d Cir. 1985). 13 insufficient evidence that the defendants engaged in bookmaking under Texas law merely by accepting bets in Texas. The court’s holding was based upon its conclusion that the actual bookmaking (i.e. accepting bets), actually occurred in the Dominican Republic and Jamaica where it was legal. Truesdale does, at first blush, support Claimants’ position because here, as in Truesdale, bets were actually placed outside of the United States in a jurisdiction where betting was legal and where the betting business was properly licensed. However, the defendants in Truesdale were charged with bookmaking, and the government’s averments here are not analogous. Rather, the government alleges that IFS-NJ was promoting gambling under a New Jersey statute that prohibits conduct which materially aids any form of gambling activity, N.J.S.A. 2C:37-2a(2). Moreover, upon a closer reading, Truesdale actually undermines Claimants’ position. In Truesdale, bookmaking was only one of five activities defined as gambling promotion under Texas law. Section 47.03(a)(3) of the Texas Penal Code made it a separate offense for an individual to become[ ] a custodian of anything of value bet or offered to be bet[ ] for gain. However, the indictment in Truesdale did not allege that conduct as a predicate for the federal prosecution under S 1955. It only broadly alleged bookmaking. Therefore, the fact that the [defendants had] engaged in financial transactions in the State of Texas that may have run afoul of Section 47.03(a)(3) [was] irrelevant. 152 F.3d at 447. Nevertheless, in Truesdale, the government argued that the convictions could be upheld because the underlying financial transactions were an essential part of the operation. Id. at 449. The court of appeals rejected that argument, saying: The government maintains that these financial transactions were an essential part of the operation. It may be true that these financial transactions were essential to the overall operation, but they do not establish an essential element of the crime of bookmaking as it is defined by Texas law. The Texas bookmaking statute prohibits recording, receiving, and forwarding bets; where and how the money is paid out 14 is irrelevant under section 47.03(a)(2). Becoming a custodian of money that is used to place bets offshore would be a violation of section 47.03(a)(3). However, the indictment did not allege that the appellants violated section 47.03(a)(3) and the jury was not instructed on any such violation. Nor was the case tried on that theory. In short, the government’s case and the jury’s verdict were focused exclusively on illegal bookmaking, and we cannot affirm the case on a different theory. Id. at 449 (emphasis added). The highlighted portion of this statement is dicta, but it illustrates the distinction between the circumstances in Truesdale, and the circumstances here. The third case Claimants rely upon is California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987). Claimants argue that Cabazon stands for the proposition that one sovereign cannot criminalize gambling activity that is legal under the laws of another sovereign. However, Cabazon is even less helpful to Claimants than Truesdale. Cabazon was concerned with whether Congress intended to allow state laws to apply on Indian reservations. The precise issue was whether a state could apply its gambling laws to bingo games held on Indian reservations. Id. at 207212. In resolving that issue the court merely stated that nothing in the Organized Crime Control Act (which includes S 1955) permits the states to enforce federal gambling laws against Indian tribes. Id. at 213-14. This unique case involving tribal sovereignty in no way furthers our inquiry into whether IFS-NJ promoted gambling as defined under applicable New Jersey law. Given the language of the relevant statute here, we conclude that the government established probable cause that IFS-NJ’s conduct violated New Jersey’s law against promoting gambling, and the government therefore satisfied its burden of proof with regard to the first element of S 1955(b)(1)(i). However, the government must establish probable cause as to every essential element of S 1955(b)(1), On Leong, 918 F.2d at 1292, and Claimants allege that the government ignored the second and third elements of that statute. The 15 government insists that Claimants never raised this argument in the district court, and the Claimants do not argue to the contrary. Nor do they elaborate on their statement that the government ignored the remaining elements here. Rather, Claimants merely make the general assertion that IFS-NJ was not an illegal gambling business and, the defendant funds were therefore not subject to seizure and forfeiture. Reply Br. at 16. We generally do not address issues that are raised for the first time on appeal. Harris v. City of Philadelphia, 35 F.3d 840, 845 (3d Cir. 1994) (This Court has consistently held that it will not consider issues that are raised for the first time on appeal.).12 Here, however, the parties have entered into a stipulation which allows us to readily dismiss this additional claim. If we assume arguendo that Claimants have not waived this argument, it is clear that the stipulated facts enable the government to satisfy its burden under the second and third elements of SS 1955(b)(1)(ii) and (iii). The second element of S 1955(b)(1) requires that the illegal gambling business . . . involve[ ] five or more persons who conduct, finance, manage, supervise, direct or own all or part of such business. 18 U.S.C.S 1955(b)(1)(ii). A person  ‘conducts’ an illegal gambling business [under the statute] by performing any necessary function in the gambling operation, other than that of a mere bettor. United States v. Miller, 22 F.3d 1075, 1077 (11th Cir. 1994)(citation omitted). Here, the parties stipulate that each of the following seven people conducted the gambling business: Dennis Pokoyoway, Michael Sydor, Yar Jacobs, Juliana Olenych, Ivan Olenych, Katharine Sobczak and Gary Bowman.13 _________________________________________________________________ 12. An exception to this general principle existsin the horrendous case where a gross miscarriage of justice would occur if we did not consider an issue not raised in the district court. Newark Morning Ledger v. United States, 539 F.2d 929, 932 (3d Cir. 1967). 13. Pokoyoway, Sydor and Jacobs were district managers for IFS-NJ. Pokoyoway oversaw IFS-NJ’s daily operations and deposited funds received from bettors into bank accounts maintained for the benefit of IOM and ASL. Sydor signed the Quick Chek Service application to 16 The third element requires that the gambling operation has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day. 18 U.S.C. S 1955(b)(1)(iii). The facts as stipulated to in the first amended complaint establish that IFS-NJ was in operation for more than 30 days, and that IFS-NJ received more than $2,000 in a single day. Claimants’ argue that the district court erred in considering Pokoyoway’s state convictions and admissions he made during his guilty plea colloquy when determining if the government satisfied its burden. Inasmuch as the conviction and colloquy came after the initial seizure of currency, Claimants maintain that they can not possibly furnish probable cause for a seizure that already occurred. Claimants’ Br. at 1. The second paragraph of S 1955(d)14 incorporates the _________________________________________________________________ Western Union and received bills sent to IFS-NJ. Ivan and Juliana Olenych were members of the board of IFS-Canada. They set up IFS-NJ and recruited and hired Pokoyoway. Sobczak helped Pokoyoway with bookkeeping, preparing deposits and faxing information to Bowman in England. Finally, Bowman owned, funded, operated and promoted the gambling enterprises that IFS-NJ served. Of the seven individuals, only two -- Pokoyoway and his girlfriend, Sobczak,-- were actually present in New Jersey. Bowman was in England and the other four were in Canada. Claimants argue that each of the people needed to meet the second element under S 1955(1) must be present in the United States. However, they cite no authority for that proposition and we have found none. The government does not respond to that assertion other than listing these seven individuals and stating that this is sufficient to satisfy the second element. We agree. As we have discussed, the offending conduct occurred in New Jersey, and nothing in S 1955 suggests that Congress intended to require all of the persons involved in an illegal gambling business to be located inside of the United States so long as the other conditions of the statute are satisfied. Moreover, no such requirement arises under the Commerce Clause. See United States v. Boyd, 149 F.3d 1062, 1066 (10th Cir. 1998). Accordingly, we reject Claimants’ position. 14. Which provides: All provisions of law relating to the seizures, summary, and judicial forfeiture procedures, and condemnation of 17 burden of proof required for customs forfeitures under 19 U.S.C. S 1615.15 The claimant in a proceeding under S 1615 bears the ultimate burden, however, probable cause [must] first be shown for the institution of such suit or action. There is a circuit split as to whether the government must demonstrate that probable cause existed before it initiated forfeiture proceedings under S 1615, or whether the government can demonstrate probable cause by relying upon evidence it was unaware of until after proceedings began. Compare United States v. $191,910.00 in U. S. Currency, 16 F.3d 1051, 1066 (9th Cir. 1994) (prohibiting the use of after-acquired evidence); United States v. $91,960.00, 897 F.2d 1457, 1462 (8th Cir. 1990) (same), with United States v. Premises and Real Property at 4492 S. Livonia Road, 889 F.2d 1258, 1268 (2d Cir. 1989)(stating that after-acquired evidence can support probable cause); United States v. $67,220.00 in United States Currency, 957 F.2d 280, 284 (6th Cir. 1992) (adopting Livonia ). Pokoyoway pled guilty to the state gambling charges on December 3, 1998. See First Amend. Compl. atP 59. However, the government did not file its forfeiture _________________________________________________________________ vessels, vehicles, merchandise, and baggage for violation of the customs laws; the disposition of such vessels, vehicles, merchandise, and baggage or the proceeds from such sale; the remission or mitigation of such forfeitures; and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures and forfeitures incurred or alleged to have been incurred under the provisions of this section, insofar as applicable and not inconsistent with such provisions. Such duties as are imposed upon the collector of customs or any other person in respect to the seizure and forfeiture of vessels, vehicles, merchandise, and baggage under the customs laws shall be performed with respect to seizures and forfeitures of property used or intended for use in violation of this section by such officers, agents, or other persons as may be designated for that purpose by the Attorney General. 18 U.S.C. S 1955(d). 15. The second sentence of 18 U.S.C. S 1995(d) states: [a]ll provisions of laws relating to the seizures, . . . and judicial forfeiture procedures, . . . of vessels, vehicles, merchandise, and baggage for violation of the customs laws; . . . shall apply to seizures and forfeitures . . . incurred under the provisions of this section, insofar as practicable and not inconsistent with such provisions. 18 complaint until January 4, 1999. Therefore, if we conclude that forfeiture begins with the filing of the forfeiture complaint, Pokoyoway’s plea would not be after-acquired evidence, and there is no issue as to whether his conviction and admissions he made during his plea colloquy can establish the probable cause necessary to support the forfeiture. On the other hand, since the Fleet Bank accounts were seized in December 1996, Pokoyoway’s conviction and plea colloquy statements would beafteracquired evidence. We have not yet addressed this issue directly. However, we have addressed the question in the context of a civil forfeiture under 21 U.S.C. S 881. In United States v. Ten Thousand Seven Hundred Dollars and No Cents ($10,700.00), 258 F.3d 215 (3d Cir. 2001), we stated: [T]he government bears the burden of establishing . . . probable cause to believe that the currency was subject to forfeiture at the time that it filed the forfeiture complaints in the District Court. Id. at 222 (emphasis added). Our analysis was based upon our reading of the respective burdens of proof for customs seizures under 19 U.S.C. S 1615. As noted above, the same standard applies to forfeitures under S 1955 because S 1955(d) incorporates the procedures for customs forfeitures into the gambling statute. That controls our inquiry here, and we therefore hold that probable cause must exist to support the forfeiture when the government files the forfeiture complaint.16 As noted above, Pokoyoway pled guilty on December 3, 1998, and the government filed its forfeiture complaint approximately one month later on January 4, 1999. 17 Therefore, admissions Pokoyoway made during his change _________________________________________________________________ 16. This view avoids the obvious questions of fundamental fairness that would rise from the government attempting to have a court order forfeiture without first having an adequate factual basis to support the request. 17. As noted, the government filed a first amended complaint on March 25, 1999 to correct the amount of the defendant currency and the Fleet Bank account numbers. 19 of plea colloquy were properly considered in the course of the subsequent forfeiture proceedings under S 1955(d).18 Since the government met its burden of establishing probable cause that the currency was subject to forfeiture, the burden shifted to Claimants to establish by a preponderance of the evidence that the property was not subject to forfeiture. On Leong, 918 F.2d at 1292. (Once the government demonstrates probable cause in a forfeiture case, the ultimate burden shifts to the claimant to prove by a preponderance of the evidence that the property is not subject to forfeiture.).