Court Opinion

ID: 2967265
Source: CourtListenerOpinion
Date Created: 2015-09-22 02:13:30.436858+00
Date Added: 2024-06-11T11:43:13.027084
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellee,

v.

BARBARA IMOGENE MORGAN,
                                                                        No. 96-2588
Claimant-Appellant,

and

CHARLES T. MORGAN,
Defendant.

Appeal from the United States District Court
for the Southern District of West Virginia, at Beckley.
Elizabeth V. Hallanan, Senior District Judge.
(CR-95-160)

Argued: October 29, 1997

Decided: August 17, 2000

Before WIDENER and ERVIN,* Circuit Judges, and
PHILLIPS, Senior Circuit Judge.

_________________________________________________________________

Affirmed by published opinion. Judge Widener wrote the opinion, in
which Senior Judge Phillips joined.
_________________________________________________________________

*Judge Ervin heard oral argument in this case but died prior to the
time the decision was filed. The decision is filed by a quorum of the
panel. 28 U.S.C. § 46(d).
COUNSEL

ARGUED: Stuart Andrew McMillan, BOWLES, RICE, MCDAVID,
GRAFF & LOVE, Charleston, West Virginia, for Appellant. Betty
Adkins Pullin, Assistant United States Attorney, Charleston, West
Virginia, for Appellee. ON BRIEF: Leonard Knee, BOWLES, RICE,
MCDAVID, GRAFF & LOVE, Charleston, West Virginia, for Appel-
lant. Rebecca A. Betts, United States Attorney, Charleston, West Vir-
ginia, for Appellee.

_________________________________________________________________

OPINION

WIDENER, Circuit Judge:

The present case arises from an application of 21 U.S.C. § 853,
which provides for the forfeiture of substitute property when the gov-
ernment is unable to satisfy a judgment in its favor from the defen-
dant's assets that constituted or were derived from the proceeds of
criminal activity. The district court interpreted the third-party provi-
sion of the statute, which prohibits the government from forfeiting
assets in which a third party had a property interest, to require that the
third party had dominion and control over the asset. Consequently, the
district court found that the government could forfeit the property in
question because the third party did not have dominion and control
over the assets. For the reasons that follow, we affirm.

I.

Under federal forfeiture law, the court can order a criminal defen-
dant convicted of illegal activity to forfeit to the government proceeds
gained and property used in the criminal activity or derived there-
from. 21 U.S.C. § 853(a). When the defendant has disposed of these
assets or the government cannot locate these assets due to an act or
omission of the defendant, the court may order substitute property of
the defendant forfeited. 21 U.S.C. § 853(p). Section 853(n) of Title 21
provides a third party the opportunity to prevent forfeiture of substi-
tute property by petitioning the court. The petitioner must assert her
property interest in the substitute assets, and the court then must hold

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a hearing on the claim. 21 U.S.C. § 853(n)(6). At the hearing, the bur-
den is on the petitioner to establish by a preponderance of the evi-
dence that:

           (A) the petitioner has a legal right, title, or interest in the
          property, and such right, title, or interest renders the order
          of forfeiture invalid in whole or in part because the right,
          title, or interest was vested in the petitioner rather than the
          defendant or was superior to any right, title, or interest of
          the defendant at the time of the commission of the acts
          which gave rise to the forfeiture of the property under this
          section; or

           (B) the petitioner is a bona fide purchaser for value of the
          right, title or interest in property and was at the time of pur-
          chase reasonably without cause to believe that the property
          was subject to forfeiture under this section.

21 U.S.C. § 853(n)(6). Upon such a showing, the district court must
amend the forfeiture order to respect the petitioner's property interest.
21 U.S.C. § 853(n)(6).

II.

Charles T. Morgan (Mr. Morgan), petitioner's husband, was con-
victed on multiple counts for drug activity that began in 1992. Specif-
ically, he was convicted of one count of conspiracy to distribute
marihuana in violation of 21 U.S.C. § 846, two counts of distribution
of marihuana in violation of 21 U.S.C. § 841(a)(1), one count of
money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(I), two
counts of engaging in monetary transactions in criminally derived
property with a value greater than $10,000 in violation of 18 U.S.C.
§ 1957(a), and one count of criminal contempt under 18 U.S.C.
§ 401(3). The jury also found that Morgan derived $220,754 from his
marihuana conspiracy and that $40,000 was involved in or traceable
to the § 1956 money laundering count in 1994, and that $54,000 was
involved in or traceable to the § 1957 money laundering count. Con-
sequently, the district court ordered Mr. Morgan to forfeit $220,754
pursuant to 21 U.S.C. § 853 and $94,000 pursuant to 18 U.S.C.

                     3
§ 982(a)(1).1 The government could not obtain the money related to
the charges for forfeiture, and the court ordered by first order of sub-
stitution of assets that the following property be substituted pursuant
to 21 U.S.C. § 853(p): 1) a certificate of deposit in the name of
Charles T. Morgan at Matewan National Bank; 2) a savings account
at First Century Bank in the name of Charles T. or Barbara I. Morgan;
3) a certificate of deposit at the Bank of Raleigh in the name of Bar-
bara or Charles T. Morgan; and 4) a checking account at the First
Tennessee Bank in the name of Barbara I. or Charles T. Morgan.2

Barbara Morgan petitioned the district court pursuant to 18 U.S.C.
§ 853 asserting that she was a third party who had a property interest
in the certificate of deposit established in 1988 at the Bank of Raleigh
(certificate of deposit) and the checking account opened in 1994 at the
First Tennessee Bank (checking account), and consequently the assets
were not property of the defendant under § 853(p).3 The district court
held a hearing pursuant to 18 U.S.C. § 853(n) and denied her relief
as to the certificate of deposit and the checking account finding that
she failed to prove by a preponderance of the evidence that she had
a property interest in these assets because she did not have dominion
and control over them. Mrs. Morgan appeals the district court's find-
ing with regard to the certificate of deposit and the checking account.
The issue before us is whether Mrs. Morgan met her burden of proof
in claiming that she had a legal right, title, or interest that was vested
or superior to her husband's.

Jurisdiction in this case is proper under 28 U.S.C.§ 1291 as an
_________________________________________________________________
1 The district court also ordered a cargo van related to the money laun-
dering charges forfeited pursuant to 18 U.S.C. § 982(a)(1). The van was
forfeited, and there is no dispute with regard to it.
2 The district court also ordered that real property located in Greene
County Tennessee be forfeited. Mrs. Morgan petitioned the court claim-
ing a property interest in the real property, and the court rejected her peti-
tion after holding the 28 U.S.C. § 853(n) hearing. She has not appealed
this finding of the district court.
3 Mrs. Morgan's petition also asserted an interest in the certificate of
deposit at Matewan National Bank and the savings account at First Cen-
tury Bank. She withdrew her claims as to these assets at the § 853 hear-
ing.

                     4
appeal from the district court's final forfeiture order. We review the
district court's interpretation of a statute de novo, United States v. Let-
terlough, 63 F.3d 332, 334 (4th Cir.), cert. denied, 516 U.S. 955
(1995), and the district court's findings of fact for clear error. See
United States v. $9,041,598.68, 163 F.3d 238, 246 (5th Cir. 1998),
cert. denied, 67 U.S.L.W. 3768 (Jun. 21, 1999).

III.

The issue with regard to the checking account at the First Bank of
Tennessee and the certificate of deposit at the Bank of Raleigh is the
extent of any right, title, or interest of Mrs. Morgan in it under
§ 853(n)(6)(A), or whether a showing of the prohibited criminal activ-
ity prior to the establishment of the property interest in question
makes unnecessary any further inquiry. Unfortunately, in evaluating
Mrs. Morgan's petition with regard to these items, the language of the
statute is less than clear. We recognize that some circuits have ana-
lyzed the question of whether a § 853(n) petitioner has a property
interest by determining ownership under state law. United States v.
Lester, 85 F.3d 1409 (9th Cir. 1996); see also United States v.
Alcaraz-Garcia, 79 F.3d 769 (9th Cir. 1996); United States v. Certain
Real Property Located at 2525 Leroy Lane, West Bloomfield, Michi-
gan, 972 F.2d 136 (6th Cir. 1992); United States v. Stazola, 893 F.2d
34 (3d Cir. 1990). We do not think it is necessary, however, to con-
sider the role of state law in the present case in light of Congressional
intent.

In a case such as this, courts "may look to the legislative history
for guidance in interpreting the statute." United States v. Childress,
104 F.3d 47, 53 (4th Cir. 1996). In the statute at issue in this case,
Congress did not give guidance in the statute for determining the
meaning of its words. Consequently, where Congress does not define
an ambiguous term, we must determine what Congress intended.
United States v. Reckmeyer, 836 F.2d 200, 205 (4th Cir. 1987). The
intent of Congress in enacting the forfeiture provisions of § 853 was
to "strip these offenders [racketeers and drug dealers] and organiza-
tions of their economic power." S. Rep. No. 225, reprinted in 1984
U.S.C.C.A.N. 3182, 3374. Therefore, Congress noted that § 853(n)(6)
"should be construed to deny relief to third parties acting as nominees
of the defendant or who knowingly engage in sham or fraudulent

                     5
transactions." S. Rep. No. 225, supra at 3392 n.47. In order to effectu-
ate the legislative purpose of the statute, courts must evaluate whether
the petitioner is a nominee4 when reviewing the substance of a
§ 853(n) claim.

Failing to look beyond bare legal title or whether the petitioner has
a property interest under state law would foster manipulation of own-
ership by persons engaged in criminal activity. United States v. 526
Liscum Drive, Dayton, Montgomery County, 866 F.2d 213, 217 (6th
Cir. 1989). In light of the statutory purpose of§ 853, we hold that the
district court properly employed a dominion and control test in its
§ 853(n)(6)(A) evaluation of whether Mrs. Morgan had a property
interest sufficient to prevent forfeiture of the checking account and
the certificate of deposit. 526 Liscum Drive, 866 F.2d at 217 (finding,
in 21 U.S.C. § 881 forfeiture case, that where claimant held legal title
to property, claimant must prove some dominion or control or other
indicia of true ownership to demonstrate she was not nominal or straw
owner); United States v. One 1945 Douglas C-54 (DC-4) Aircraft,
etc., 604 F.2d 27, 28-9 (8th Cir. 1979) (holding, in 21 U.S.C. § 881
forfeiture, that owners of res have standing to challenge a forfeiture
proceeding, but that bare legal title may be insufficient to establish
ownership), cert. denied, 454 U.S. 1143 (1982).

A.

Applying the dominion and control test to the present case, we are
of opinion that the district court correctly found that Mrs. Morgan
lacked dominion and control over the checking account in Tennessee
and the certificate of deposit in West Virginia. We first turn to the
evidence supporting the checking account finding. The record reveals
that Mrs. Morgan and her husband, the criminal defendant, estab-
lished the checking account at the First Tennessee Bank in 1994.
Although they opened the checking account as a joint account with
both names on the account and Mrs. Morgan filled out a signature
card, the events leading up to the opening of the checking account and
the manner in which the account was treated subsequent to its open-
_________________________________________________________________
4 For the purposes of this opinion, the word nominee refers to nominal.
Nominal is defined as "[e]xisting in name only, not in reality." Webster's
II 798 (2d ed. 1988).

                    6
ing reveal that Mrs. Morgan was no more than a mere name on the
account, with no power over the disposition of the account funds.

First, the checking account was opened to facilitate the purchase of
the residence in Tennessee. The district court found that the forfeited
Tennessee residence was purchased with illegally obtained funds for
the purpose of furthering Mr. Morgan's illegal marihuana activity.
Mrs. Morgan has not appealed the ruling as to the Tennessee resi-
dence. The First Bank of Tennessee gave the mortgage for the Ten-
nessee residence and the checking account was used to pay the
mortgage bills. In order to open this checking account, Mr. Morgan
did the following: borrowed $40,000 from Sheila Spratt Morgan5
promising to repay her with money from cashed-in certificates of
deposit; deposited the borrowed $40,000 plus an additional $4,000 to
start the checking account; deposited another $10,000 into the check-
ing account and then used the $54,000 in total to pay the down pay-
ment for the Tennessee residence. At the time that Mr. Morgan
opened the First Tennessee checking account and made the financing
arrangements with the bankers there, Mrs. Morgan was present but
had no idea about the logistics of the transactions. Mr. Morgan, him-
self, arranged to have subsequent mortgage payments by automatic
deposit, and he even made an additional cash payment on the princi-
pal of the mortgage in June 1994 without Mrs. Morgan's knowledge.
Mrs. Morgan never withdrew any money from the First Tennessee
checking account, she never wrote any checks on the account, and
shortly after the closing on the Tennessee residence, the bank state-
ments for the checking account were sent only to Mr. Morgan at the
Tennessee residence.6

Some of Mrs. Morgan's payroll checks were deposited into the
_________________________________________________________________
5 Mrs. Sheila Spratt Morgan was the bookkeeper for Morgan Sanita-
tion, as well as the sister of Craig Spratt, Mr. Morgan's cohort in the
marihuana distribution business. Craig Spratt was also convicted for the
marihuana conspiracy. Craig Spratt was a certified public accountant and
it was he who suggested the financial arrangements for purchase of the
Tennessee residence to allay suspicion of its use in drug selling activity.
6 Mrs. Morgan testified that Mr. Morgan was the one who lived at the
Tennessee residence and that she had been there only five times before
his arrest.

                    7
First Tennessee account, but as with the rest of the finances, Mr. Mor-
gan "took the salary" and put it into the checking account because
"[h]e said that he could manage it better than [Mrs. Morgan]." Mrs.
Morgan was not in control of her own salary, the checking account,
or any of the finances involved with the Tennessee residence. Despite
the placing of Mrs. Morgan's name on the account and on the deed
to the Tennessee residence as the sole owner, she was nothing more
than a nominal owner of both. In fact, Mr. Morgan had a practice of
acquiring property in Mrs. Morgan's name, when Mrs. Morgan knew
little or nothing about these properties.7 The district court also cor-
rectly found that the account was used "to give the impression that the
Tennessee [residence] was being purchased with legitimate funds
when, in fact, it was not." This finding, coupled with Mrs. Morgan's
minimal involvement and knowledge regarding the checking account
was further proof that Mr. Morgan used her name on the account the
way he commonly used "nominee titleholders in an effort to conceal
illegally obtained money." We are thus of opinion that the district
court properly found that Mrs. Morgan was not vested with nor did
she have a superior right, title, or interest in the First Tennessee
checking account.

B.

We now turn to the certificate of deposit in the Bank of Raleigh in
West Virginia. The district court properly considered the evidence
and testimony presented at the criminal trial of Mr. Morgan, the jury
verdict in that trial, Mrs. Morgan's § 853(n) petition and the govern-
ment's response, and the evidence and testimony presented at the
hearing on the petition. 21 U.S.C. § 853(n)(5). From that evidence,
the district court concluded that Mrs. Morgan was"merely a nominee
with no dominion and control over . . . the certificate of deposit."
_________________________________________________________________

7 In 1988, Mr. Morgan transferred title to eight pieces of land to Mrs.
Morgan due to "land disputes" he had with neighbors. Later he also listed
her as a lien holder on the purchase of a van that was used in the mari-
huana conspiracy. Mrs. Morgan claimed that she did not know that her
name was on the lien for the van, yet she signed a release to remove her
name from that same lien.

                    8
The district court's finding that Mrs. Morgan was a nominee is not
clearly erroneous. Mrs. Morgan testified that the certificate of deposit
was bought in 1988 with Mr. Morgan's $15,000 that he had received
as part of his Black Lung lump sum settlement. The fact that all of
the money used for the certificate of deposit belonged to Mr. Morgan
is further evidence that Mrs. Morgan was only a nominal owner with-
out any control over it. Mr. Morgan had received his Black Lung set-
tlement in 1988 of $75,000 with which he purchased a van, household
items, and the $15,000 certificate of deposit in the Bank of Raleigh.
He placed the rest of the money in a box that he kept within the
house. After the 1988-89 purchases, Mrs. Morgan testified that "he
never let [her] spend no more of it." Mr. Morgan also received
monthly Black Lung benefits which he allowed Mrs. Morgan to use
to pay the bills and buy groceries, while he took her salary.

In addition, the district court had evidence before it that demon-
strated that Mr. Morgan controlled the certificate of deposit and the
use of the certificate of deposit. With the sole exception that Mr. Mor-
gan permitted her to cash interest checks, made out in both names,
from the certificate of deposit, Mrs. Morgan did not withdraw from,
or use as collateral or deposit into, the certificate of deposit in
Raleigh. Even at times when she was not paid a regular salary or
when the family was having financial difficulties, she did not draw
upon the certificate of deposit. There is also evidence that Mr. Mor-
gan had shown Mrs. Morgan as a lien holder on a Ford van which had
been subjected to the drug forfeiture laws and, although the lien was
placed on the vehicle without her knowledge, she had released it at
Mr. Morgan's instance. See n. 7, supra.

Accordingly, we affirm the conclusions of the district court that the
certificate of deposit in the Bank of Raleigh was subject to forfeiture
because Mrs. Morgan's name on the certificate along with Mr. Mor-
gan's was merely nominal. She had no control over the money and
the court's implicit finding that the certificate was not hers "rather
than" his, see 21 U.S.C. § 853(n)(6)(A) was justified by the evidence.
A large part of the evidence supporting the holding of the district
court was heard orally in open court. The district judge saw the wit-
nesses and heard them testify. Thus, her fact findings are entitled to
special deference. See Anderson v. Bessemer City , 470 U.S. 564, 572-
73 (1984); see Fed. R. Civ. P. 52(a).

                    9
The judgment of the district court appealed from is accordingly

AFFIRMED.

                    10