Opinion ID: 597809
Heading Depth: 2
Heading Rank: 2

Heading: Statutory Civil Forfeiture

Text: 19 With this historical background, we turn to the statutory law that governs forfeiture today. The Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. §§ 801-896 (1988), provides for civil forfeitures in Part E--Administrative and Enforcement Provisions, §§ 871-886. The drug-related asset forfeiture scheme embodied in § 881 establishes a two-step process for the forfeiture of property to the sovereign United States. Under § 881(a)(7) that process applies to forfeiture of: 20 [a]ll real property ... which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this title punishable by more than one year's imprisonment, except that no property shall be forfeited ... by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner. 21 Forfeiture may be had under § 881(a)(6) of [a]ll moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance [as well as] all proceeds traceable to such an exchange. (emphasis added). 22 The government has three options when it institutes a civil forfeiture in rem proceeding: (1) file a complaint pursuant to the Supplemental Rules for Certain Admiralty and Maritime Claims, which triggers the issuance of a summons and warrant by a court clerk without requiring a certification of exigent circumstances; (2) request the issuance of a seizure warrant in the manner provided for in Fed.R.Crim.P. 41 that requires a finding of probable cause ex parte by a judicial officer; or (3) when the Attorney General has probable cause to believe the property is subject to civil forfeiture, seize it following applicable customs law as set forth in § 881(d). See United States v. 4492 S. Livonia Road, 889 F.2d 1258, 1262-67 (2d Cir.1989). 23 The third option was followed in the case at hand. Under § 881(d) those procedures used under the United States Customs Laws, as spelled out at 19 U.S.C. § 1615 (1988), are incorporated in the forfeiture proceedings. Section 1615 describes the burden of proof and requires that the agency seeking forfeiture must first demonstrate probable cause supporting the action. The initial step in the forfeiture process under §§ 881(a)(6) and (7) accordingly requires the government establish probable cause that connects the property with drug trafficking. There need not be a substantial connection between the drug activities and the property in question, but only a nexus between them. See United States v. 38 Whalers Cove Drive, 954 F.2d 29, 33 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 55, 121 L.Ed.2d 24 (1992); United States v. Whites Hill Road, 916 F.2d 808, 811-12 (2d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 972, 112 L.Ed.2d 1058 (1991); United States v. Banco Cafetero Panama, 797 F.2d 1154, 1160 (2d Cir.1986). When forfeiture is of a bank account, the government must persuade the factfinder that there is probable cause to believe the funds represent proceeds traceable to a drug transaction. E.g., United States v. One 1987 Mercedes 560 SEL, 919 F.2d 327, 331-32 (5th Cir.1990). 24 To establish probable cause neither the real property nor bank proceeds need to be linked to any one particular transaction, Banco Cafetero, 797 F.2d at 1160, but the government must establish reasonable grounds--that is to say, rising above mere suspicion--that the property is subject to forfeiture. Id.; 4492 S. Livonia Road, 889 F.2d at 1267. The failure to account for large amounts of cash may be considered a factor in establishing probable cause that money represents the proceeds of drug transactions. See Whites Hill Road, 916 F.2d at 813; United States v. $2,500 in U.S. Currency, 689 F.2d 10, 16 (2d Cir.1982), cert. denied, 465 U.S. 1099, 104 S.Ct. 1591, 80 L.Ed.2d 123 (1984). 25 Once the government has demonstrated probable cause, the second step in the forfeiture proceeding shifts the burden of proof to the claimant to demonstrate by a preponderance of the evidence that the factual predicates necessary to show probable cause have not been met or to show claimants lack of knowledge or consent to the drug-related activities. See 19 U.S.C. § 1615; Whites Hill Road, 916 F.2d at 812; United States v. 15 Black Ledge Drive, 897 F.2d 97, 102 (2d Cir.1990); 4492 S. Livonia Road, 889 F.2d at 1267. In the case of a bank account, the claimant bears the burden of proving that the account does not contain proceeds traceable to drug transactions, but rather represents legitimate income. See Banco Cafetero, 797 F.2d at 1161. Once probable cause has been shown, the ultimate burden of proof on whether factual predicates have been met or whether there is a lack of knowledge or consent is shouldered by the claimant. We turn now to apply this analysis to the district court's decision respecting the Beckford's real property and their Dollar Dry Dock accounts. II Two-Step Process Applied to Instant Case A. Real Property 26 We need not tarry long in explaining that the district court properly forfeited to the United States the real properties at 785-87-89 St. Nicholas Avenue and 1208 Clay Avenue. Due to the extraordinary volume of drug transactions occurring on, nearby, or directly related to the premises, the trial court correctly found probable cause existed to demonstrate that the properties had been used to facilitate drug trafficking. Further, it did not err in discrediting claimants' improbable testimony that they had no knowledge of drug-trafficking on their properties and had not consented to it, particularly given their own arrests on the site and their presence during arrests for various drug transactions that took place inside the Franchise Restaurant. 27 Claimants essentially contend that there was insufficient evidence to support the probable cause finding and that any drug trafficking on their premises was beyond their power to control because law-enforcement agencies had abandoned the drug-ridden neighborhood where their property was located, thereby giving drug-traffickers free reign there. We are unable to accept either argument. First, less evidence than was produced in the instant case has sufficed to establish the probable cause required for forfeiture of property. See, e.g., 15 Black Ledge Drive, 897 F.2d at 101; 38 Whalers Cove Drive, 954 F.2d at 32-34 (two cocaine sales totalling $250 sufficient to demonstrate probable cause for forfeiture of $68,000 interest in condominium); United States v. One 1986 Mercedes Benz, 846 F.2d 2, 5 (2d Cir.1988) (noting that transportation of minute quantity of drugs may suffice to merit forfeiture of vehicle). 28 Second, regardless of the drug-ridden culture that flourished in their neighborhood, claimants have failed to prove by a preponderance of the evidence that they took all the precautions reasonably within their power to prevent drug sales from occurring on their property. Once a claimant acquires knowledge that his or her property is being used for drug-related purposes, that individual must take reasonable steps to prevent this illicit use of the premises in order to show a lack of consent to such use. See United States v. 141st Street Corp., 911 F.2d 870, 879 (2d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1017, 112 L.Ed.2d 1099 (1991); United States v. 418 57th St., 922 F.2d 129, 132 (2d Cir.1990). Claimants here made no such showing. 29 Moreover, claimants were not ignorant of the drug sales on their property. Nothing in the record suggests their involvement in or presence near drug sales had diminished or that they took reasonable steps to prevent others from using their property to peddle narcotics. That similar activity may well have pervaded the neighborhood does not excuse them. The legal standard we employ implicitly takes account of the hurdles property owners may face in drug-infested neighborhoods by requiring only that property owners take reasonable steps under the circumstances to prevent their property from facilitating drug transactions. See id. Thus, the district court properly forfeited claimants' real property to the United States. B. Bank Accounts 30 The trial court's decision with respect to the bank accounts is more problematic. The record is not clear as to which of the two stages of a forfeiture proceeding it had reached. As the trial began on December 17, 1991 the trial judge announced, Based on the facts stipulated [ ] and on the materials submitted with the plaintiff's motion for summary judgment, I have determined that the probable cause requirement has been met by the government.... That shifts the burden to [claimants].... As a result of this ruling, claimants proceeded to present their case. Although the district court stated its finding considered only those activities taking place within the building, it had not limited its probable cause finding to claimants' real property and, more particularly, did not state that its probable cause finding excluded the bank accounts. The government's attorney declared at oral argument on appeal that he would have presented further proof that would have established probable cause with respect to the bank accounts had he not believed that a finding of probable cause had already been made at the commencement of the trial. 31 When the two-day trial ended on December 18, the trial court stated, I find that the government has not established by any sufficient showing the fact or the inference that the money in the bank accounts was traceable to the exchanges of controlled substances in violation of the relevant chapter, and forfeiture of those sums will not be ordered. It is at least debatable whether this finding was contrary to the finding it made the day before. Again, the trial court failed to state whether the first or probable cause step was not established by the government's proof or whether the trial court was persuaded that claimant had carried its burden of proof at the second step of the proceeding. 32 The government urges us to make a probable cause finding based on a comparison between the income reported on claimants' 1985-86 tax returns and their bank deposits in the context of the extensive drug-trafficking that occurred on claimants' property. We decline that invitation and believe instead that this part of the case must be remanded. A factual determination of this sort is more properly decided by the district court in the first instance. Once the government has had the opportunity to present its proof more fully--and assuming it succeeds in demonstrating probable cause--the claimants must of course then be permitted to present evidence to prove that the source of the funds in the two subject bank accounts came from independent, non-drug-related sources. See One 1987 Mercedes 560 SEL, 919 F.2d at 331. 33 We emphasize that on remand circumstantial evidence may form the basis of a probable cause finding in forfeiture proceedings and that the funds need not be linked to specific drug transactions in order for the government to meet the probable cause standard. See Banco Cafetero, 797 F.2d at 1160. Particularly in cases involving bank accounts, money or other fungible assets, the only proof demonstrating probable cause is likely to be circumstantial, revealing unexplained wealth in conjunction with evidence of drug trafficking. See, e.g., Whites Hill Road, 916 F.2d at 813 (probable cause established where claimant convicted of selling heroin possessed large sums of unaccounted-for cash and purchased properties in cash); $2,500 in U.S. Currency, 689 F.2d at 16 (probable cause to forfeit cash established where no apparent explanation existed for large amount of cash on hand by claimant convicted on drug charges); cf. One 1987 Mercedes 560 SEL, 919 F.2d at 332 (claimant failed to meet burden of showing legitimacy where no explanation was given for purchase of $75,000 worth of assets during eight-month period other than his testimony that proceeds represented fruits of legitimate construction work and where claimant introduced no work orders, accounts ledgers or checks deposited supporting his claim). 34 Most important, while probable cause determinations under § 881 are made by the trial court's exercise of its judgment in light of all the circumstances, see One 1987 Mercedes 560 SEL, 919 F.2d at 331, it nonetheless remains the law that the connection between an individual's private assets and drug transactions is not one to be lightly made; the connection must be supported by proof amounting to more than mere suspicion. See Banco Cafetero, 797 F.2d at 1160.