Court Opinion

ID: 612995
Source: CourtListenerOpinion
Date Created: 2011-09-01 16:23:38+00
Date Added: 2024-06-11T14:57:27.720806
License: Public Domain

FILED
                                                             United States Court of Appeals
                                                                     Tenth Circuit

                                                                  September 1, 2011
                      UNITED STATES COURT OF APPEALS
                                                   Elisabeth A. Shumaker
                                                                     Clerk of Court
                            FOR THE TENTH CIRCUIT

    UNITED STATES OF AMERICA,

                Plaintiff-Appellee,

    v.                                                    No. 11-6064
                                                   (D.C. No. 5:10-CV-00832-C)
    REAL PROPERTY KNOWN AS 7501                           (W.D. Okla.)
    N.W. 210TH STREET, OKLAHOMA
    CITY, OKLAHOMA; ONE 2006
    FORD EXPEDITION, VIN
    #1FMFU19556LA87027; ONE 2003
    LINCOLN TOWNCAR, VIN
    #1LNHM82W03Y700559; $6,400.00
    IN U.S. CURRENCY; $188,914.60
    SEIZED FROM BANK ACCOUNT
    #XXX2602 AT QUAIL CREEK
    BANK; $42,265.49 SEIZED FROM
    BANK ACCOUNT #XXX7618 AT
    QUAIL CREEK BANK; $7,766.11
    SEIZED FROM BANK ACCOUNT
    #XXX2591 AT QUAIL CREEK
    BANK; $4,365.35 SEIZED FROM
    BANK ACCOUNT #XXX5661 AT
    QUAIL CREEK BANK,

              Defendants.
    ______________________

    FRANK H. REYNOLDS,

                Claimant-Appellant.

                             ORDER AND JUDGMENT *

*
         After examining the briefs and appellate record, this panel has determined
                                                                         (continued...)
Before KELLY, GORSUCH, and MATHESON, Circuit Judges.

      Frank H. Reynolds appeals pro se from the district court’s denial of his

motion to file a claim out of time in this civil forfeiture proceeding. Exercising

jurisdiction under 28 U.S.C. § 1291, we affirm because Mr. Reynolds lacks

Article III standing.

                                    Background

      The United States filed this action under 18 U.S.C. §§ 981(a)(1)(A) & 985

seeking forfeiture of certain properties it alleged were involved in

money-laundering transactions in violation of 18 U.S.C. § 1956. In the related

criminal case, Robert Hodgins, Virtual Money Inc. (VMI), and others were

charged in the United States District Court for the District of Connecticut with

conspiring to commit money laundering and with specific acts of money

laundering. See United States v. Hodgins, No. 3:08-cr-00097-MRK (D. Conn.

April 10, 2008). The superseding indictment in the criminal case also sought

*
 (...continued)
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

                                         -2-
forfeiture of over $7 million of property involved in the offenses and traceable

thereto.

      According to the superseding indictment, Mr. Hodgins is the president of

VMI, a Dallas, Texas-based provider of “stored value cards,” which are plastic

cards that can be loaded with amounts of money and used to withdraw the funds

at remote locations. 1 The superseding indictment alleged that Mr. Hodgins’

co-conspirators directed their agents to provide the proceeds from sales of

controlled substances to agents of VMI, who loaded the proceeds in United States

dollars onto VMI stored value cards. The indictment further alleged that agents

of the co-conspirators later withdrew the funds in Colombian pesos at ATM

machines in Colombia.

      In this case the government’s Verified Complaint For Forfeiture In Rem

(Forfeiture Complaint) identified the property that was subject to forfeiture as one

tract of real property, two automobiles, currency, and funds seized from several

1
      According to the federal government’s 2007 National Money Laundering
Strategy:
             Stored value cards (sometimes referred to as prepaid cards) are
      an emerging cash alternative for both legitimate consumers and
      money launderers alike. The term ‘stored value cards’ can cover a
      variety of uses and technologies. Some cards have embedded data
      processing chips, some have a magnetic stripe, and some cards (e.g.,
      prepaid phone service cards) just have an access number or password
      printed on them (the card itself cannot access or transfer cash).

Supp. R. at 150.

                                         -3-
bank accounts. The Forfeiture Complaint also identified the record owners of the

property and the persons from whom it had been seized. Andrew Western, Inc.,

was listed as the record owner of the real property. The bank accounts were in

the names of Andrew Western, Inc., Global Star Products, Ltd., Cleansip2000,

Inc., and Robert E. Hodgins and/or Donna M. Andrew. Mr. Hodgins and

Ms. Andrew were alleged to be signatories on each bank account. The

automobiles and currency were seized from the residence of Mr. Hodgins and

Ms. Andrew. Their residence is the real property defendant in this action. The

automobiles were registered to Global Star Products, Ltd., and Virtual Money Inc.

The government alleged facts showing that the defendant properties were

traceable to the money-laundering offenses. None of the properties or persons

listed mentioned Mr. Reynolds.

      Forfeiture actions in rem arising from a federal statute are governed by

Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset

Forfeiture Actions (Supplemental Rules). Supplemental Rule G(5)(a)(i) provides:

            A person who asserts an interest in the defendant property may
      contest the forfeiture by filing a claim in the court where the action
      is pending. The claim must:
            (A) identify the specific property claimed;
            (B) identify the claimant and state the claimant’s interest in the
            property;
            (C) be signed by the claimant under penalty of perjury; and
            (D) be served on the government attorney . . . .

                                         -4-
Supplemental Rule G(5)(a)(ii) sets forth the deadlines for filing claims, which are

based on the means of notice applicable to the claimant. Supplemental Rule G(4)

prescribes the requirements for notice by publication and direct notice. As to

direct notice, “[t]he government must send notice of the action and a copy of the

complaint to any person who reasonably appears to be a potential claimant on the

facts known to the government before the end of the time for filing a claim [based

on published notice].” Supplemental Rule G(4)(b)(i).

      Mr. Reynolds is a former agent of VMI. He sought leave to file a late

claim in this action. In his Verified Motion for Leave to Submit Statement of

Interest 2 Out of Time (Verified Motion), he argued that his claim was untimely

because the government failed to provide him direct notice of the action under

Supplemental Rule G(4)(b)(i). He asserted that he was entitled to direct notice

because the government is aware of his interest in the forfeiture proceeding. In

support of this contention, Reynolds stated that the government knew he had

submitted a complaint to the Department of Justice (DOJ Complaint) on behalf of

a group called Select Agents 4 the Restoration of VMI (Select Agents). He

described Select Agents as “a group of individuals who had contracted with

[VMI] to market the Virtual Money® debit card.” Supp. R. at 24 n.1. He also

2
      “Statement of Interest” is the term used in the Supplemental Rules
applicable to admiralty proceedings. See Supplemental Rule C(6). Supplemental
Rule G(5)(a) uses the term “claim.”

                                        -5-
pointed to an amicus curiae brief that Select Agents filed in the related criminal

case. Finally, he argued that the government was aware of his interest in the

forfeiture case based on the government’s allegation in the Forfeiture Complaint

that various VMI franchise holders had participated in the money-laundering

activities.

       In the DOJ Complaint, Mr. Reynolds made the following allegations:

Select Agents contracted with VMI to market the VMI debit card. VMI and

MasterCard Worldwide are direct competitors. MasterCard Worldwide contracted

with the Treasury Department to distribute government benefits to recipients via

MasterCard debit cards. The DOJ instituted a criminal prosecution against VMI

in collusion with the Treasury Department and MasterCard Worldwide solely to

bring about the demise of VMI. As a direct result of these actions, Select Agents

suffered injury because their businesses were destroyed. Similarly, the Select

Agents’ amicus curiae brief stated, “VMI is being subjected to criminal

prosecution in order to eliminate its debit card from competition with the

Treasury’s Direct Express debit card, and . . . the DOJ is complicit in this

exercise.” Supp. R. at 39.

       The district court denied Mr. Reynolds’ Verified Motion, holding that strict

compliance with Supplemental Rule G(5) is required and that Mr. Reynolds failed

to show his late filing was the result of excusable neglect. The court found that

Mr. Reynolds had no right to direct notice under Supplemental Rule G(4)(b)(i)

                                         -6-
because he “does not claim that he is the rightful owner of any of the seized

assets.” Supp. R. at 270. It concluded that the government satisfied due process

vis-a-vis Mr. Reynolds by publishing notice on an official government website

pursuant to Supplemental Rule G(4)(a)(iv)(C). The court also cited additional

factors that weighed against a finding of excusable neglect: Mr. Reynolds was

aware of the seizure of the assets before the deadline to file a claim; the United

States would be prejudiced, albeit minimally, by the late filing; and Mr.

Reynolds’ pro se status did not excuse his non-compliance with the procedural

rules. Mr. Reynolds filed a motion to reconsider, which the district court also

denied.

                                       Discussion

      Mr. Reynolds reiterates on appeal his argument that the government’s

failure to provide him direct notice of the action resulted in his untimely claim.

He contends that he was entitled to direct notice under Supplemental Rule

G(4)(b)(i) based on the government’s awareness of his interest in the forfeiture

matter. And he claims that his due process rights were violated by the

government’s failure to provide him direct notice and the district court’s denial of

leave to file his claim out of time.

      The United States argues that the district court’s ruling should be affirmed

because Mr. Reynolds failed to show that he has Article III standing to file a

                                          -7-
claim in this forfeiture action. We agree and affirm the district court’s denial of

leave to file a late claim.

       We may raise the issue of Article III standing at any time. See Wilson v.

Glenwood Intermountain Props., Inc., 98 F.3d 590, 592-93 (10th Cir. 1996).

“Whether a claimant has constitutional standing is a threshold jurisdictional

question.” United States v. $148,840.00 in U.S. Currency, 521 F.3d 1268, 1273

(10th Cir. 2008). “To satisfy the Article III standing requirement, a party must

establish three elements: (1) injury in fact, (2) a causal relationship between the

injury and the challenged conduct, and (3) likelihood that the injury will be

redressed by a favorable decision.” Wilson, 98 F.3d at 593. We have addressed

the question of Article III standing in a civil forfeiture action:

       As the party seeking to intervene in an in rem forfeiture action, a
       claimant bears the burden of establishing his own constitutional
       standing at all stages in the litigation. At the pleading stage, a
       claimant satisfies this burden by alleging a sufficient interest in the
       seized property, such as an ownership interest, some type of lawful
       possessory interest, or a security interest.

$148,840.00 in U.S. Currency, 521 F.3d at 1273 (citations omitted).

       Mr. Reynolds did not attach a separate proposed claim to his Verified

Motion. He instead indicated his intent to incorporate the substance of his claim

into his Verified Motion. See Supp. R. at 25 (stating “Reynolds is submitting his

Statement of Interest herein in the most timely manner possible under the

circumstances . . . .” (emphasis added)). We note that Mr. Reynolds signed his

                                           -8-
Verified Motion under penalty of perjury, as required for submission of a claim

under Supplemental Rule G(5)(a)(i)(C). We look to the allegations in his

Verified Motion to determine if he established Article III standing. We liberally

construe his pro se filing. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.

1991).

         The defendant property in this civil forfeiture action includes real property,

automobiles, currency, and the funds in several bank accounts. Although

Mr. Reynolds asserted in his Verified Motion that he has an interest in this action,

we agree with the district court that he failed to allege an ownership interest in

any of the seized properties. See $148,840.00 in U.S. Currency, 521 F.3d at 1273.

In fact, he listed the properties in the DOJ Complaint, and as to each specific

property he identified the owner or owners as a person or entity other than

himself. He also did not allege a possessory or security interest in any of the

defendant properties. See id. Nor does he even mention any of the seized

properties in his appeal brief.

         Mr. Reynolds did assert, by reference to the DOJ Complaint and the Select

Agents’ amicus brief, that as a former agent of VMI, he suffered an injury due to

the loss of his business. But his own allegations trace that injury to the United

States’ criminal indictment of VMI rather than to an unlawful forfeiture of the

defendant properties in this action. See United States v. Cambio Exacto, S.A.,

166 F.3d 522, 528-29 (2d Cir. 1999). In Cambio Exacto, the Second Circuit

                                            -9-
stated that “[s]ubstantial economic harm is plainly the type of injury for which

parties may seek redress in federal court.” Id. at 528. Moreover, where that

injury is the direct result of the government’s allegedly unlawful forfeiture and

could be redressed by a successful challenge to the forfeiture, Article III standing

is satisfied. See id. Applying those principles, the court affirmed the district

court’s denial of a claimant’s motion for leave to file a late notice of claim in a

civil forfeiture action because the claimant failed to establish Article III standing.

See id. at 529. The court concluded that the claimant did not have constitutional

standing because its alleged injury was not the direct result of the forfeiture and

would not be redressed by a successful challenge to the forfeiture, which would

result in a return of the seized property to a party other than the claimant. See id.

Here, as in Cambio Exacto, Mr. Reynolds has not alleged any facts showing that

his alleged economic injury is the direct result of the forfeiture of the defendant

properties, or that a successful challenge to the forfeiture and a return of the

properties to their owners would redress his alleged injury.

                                         -10-
      Because Mr. Reynolds failed to meet his burden to establish constitutional

standing to bring a claim in this civil forfeiture action, we AFFIRM the district

court’s order denying him leave to file his claim out of time.

                                                    Entered for the Court

                                                    Scott M. Matheson, Jr.
                                                    Circuit Judge

                                        -11-