Court Opinion

ID: 770555
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:36:20+00
Date Added: 2024-06-11T17:55:51.539600
License: Public Domain

227 F.3d 902 (7th Cir. 2000)
United States of America, Plaintiff-Appellee,v.Josue Santiago, Defendant,Appeals of: Carlos M. Santiago  and Carlos E. Santiago, Claimants-Appellants.
Nos. 99-3909, 99-3910
In the  United States Court of Appeals  For the Seventh Circuit
Argued June 2, 2000Decided September 18, 2000

Appeals from the United States District Court for the Eastern District of Wisconsin.  No. 96-CR-70--Thomas J. Curran, Judge.
Before Flaum, Chief Judge, and Evans and Williams,  Circuit Judges.
Williams, Circuit Judge.

1
Carlos E. Santiago and  Carlos M. Santiago seek the return of funds  forfeited to the government following family-  member Josue Santiago's conviction on charges of  conspiracy to distribute cocaine. They contend  that certain funds included in the district  court's forfeiture order belong to them and are  not the proceeds of illegal activities. With  limited exceptions, the district court rejected  the Santiagos' claims. We affirm.

2
* On July 9, 1996, a federal grand jury returned  a ten-count superseding indictment against Josue  Santiago and his father, Carlos E. Santiago.1  The indictment charged Josue with conspiracy to  distribute cocaine and possession with the intent  to distribute cocaine, and charged Josue and his  father with laundering the proceeds of cocaine  trafficking and conspiracy to commit that crime.  The indictment also sought the forfeiture of the  proceeds of the defendants' drug-related  activities and all property used to facilitate  those activities. In particular, the indictment  identified approximately $530,000 held in  thirteen separate bank accounts in the names of  various Santiago family members including Josue,  Carlos E., and Josue's brother, Carlos M.

3
Eventually, Josue agreed to plead guilty to  conspiring to distribute cocaine in exchange for  the dismissal of the remaining charges against  him and the dismissal of all the charges against  his father. Josue also agreed to "forfeit any  right, title and interest in the property  described in the forfeiture provision of the  indictment." The district court accepted Josue's  plea and sentenced him to 92 months'  imprisonment.

4
After sentencing, and on the government's  motion, the district court entered an order  forfeiting to the government Josue's right to the  property identified in the indictment. Then,  pursuant to 21 U.S.C. sec. 853(n)(1), the  government published notice of its intent to  dispose of the forfeited property. In response,  Carlos E. and Carlos M. filed a joint motion for  return of property, asserting that the funds in  the thirteen bank accounts included in the  forfeiture order belong to one or the other of  them and are not the proceeds of illegal  activities.

5
In January 1998, the district court held a  series of hearings on the Santiagos' motion.  Jeffery Doss, an investigator with the Milwaukee  County, Wisconsin, District Attorney's Office  testified about the evidence that led law  enforcement officials to suspect that the funds  in the various bank accounts at issue were the  proceeds of Josue's illegal drug trafficking  activities and were simply being held in Carlos  E.'s and Carlos M.'s names to conceal and protect  the funds. He testified that officers searching  Josue's residence at the time of Josue's arrest  discovered numerous financial documents, many of  which were addressed to the residence Carlos E.  and Carlos M. shared, not Josue's residence. Doss  also noted that a subsequent search of Carlos  E.'s residence uncovered documents relating to  the accounts at issue in this case, including a  notebook in which Carlos E. kept track of his  finances and envelopes and bank statements from  a Puerto Rican bank.

6
Doss further testified that two confidential  informants provided information regarding Josue's  financial dealings. One informant told police  that Josue told him that he did not keep bank  accounts or property in his name, but rather kept  his assets in the names of relatives and  girlfriends. This same informant also told police  that Josue told him that he had money in Puerto  Rican bank accounts. The other confidential  informant told police that Josue had several  hundred thousand dollars at a pair of area banks  in his father's name and in his brother's or  sister's name. The information provided by these  confidential informants was later confirmed by  the existence of accounts at the banks  identified, in the names of Carlos E., Carlos M.,  and Neida Collazo (Josue's sister). Investigation  of these accounts eventually led police to the  rest of the accounts the government seeks to have  forfeited, all of which were in the names of  various Santiago family members.

7
Doss finally testified that while investigating  Josue's illegal activities in Milwaukee, the  police learned that Josue had a prior arrest for  a drug-related offense in California. Police  investigating that crime had discovered several  bank accounts in the names of Josue, Carlos E.,  and Carlos (no middle initial) Santiago, which  Josue admitted held the proceeds of his crimes.  Police also discovered that someone identifying  himself as Carlos Santiago attempted to close  these accounts shortly after Josue's arrest.

8
The government also elicited testimony from, and  submitted exhibits prepared by, Jeff Mesarich, an  Auditor with the U.S. Attorney's Office, who had  conducted an analysis of the accounts at issue  and had examined the Santiagos' financial  circumstances. With respect to each account at  issue, Mesarich described the history of the  account, including the names on the account, the  likely sources of deposits, and other evidence  relating to the account. For instance, he  explained how the money in many accounts moved  through a tortured history of successive accounts  and the name or names on certain accounts changed  several times. In addition, he pointed to  documentary evidence establishing that Carlos E.  himself recognized that several of the accounts  in his name contained Josue's funds.

9
Mesarich further testified about the income  Carlos E. and Carlos M. declared on their tax  returns over the years prior to Josue's arrest.  Before his retirement in the early 1980s, Carlos  E.'s reported wages ranged between approximately  $8,600 and $22,800. After his retirement, Carlos  E.'s reported pension and retirement income  varied between approximately $12,200 and $18,300  (with the exception of one year in which his  income was approximately $3,000). Carlos E. also  enjoyed substantial interest income beginning in  the early to mid-1980s (when Josue purportedly  began his illegal activities), which at one point  exceeded $27,000 dollars. The evidence regarding  Carlos M.'s reported income is restricted to the  1990s, but reveals that his combined income from  wages and unemployment benefits ranged between  approximately $8,600 and $13,200 and that he  reported virtually no interest income.

10
Carlos E. and Carlos M. also testified in  support of their motion, offering details  regarding their income. Carlos E. testified that  both he and his wife (before her 1991 death) had  been wage-earners most their lives, that they  received income from certain rental properties,  that one rental property was sold for $20,000 in  the late 1970s, and that he had inherited $10,000  from his father. Carlos M. testified that he had  worked nearly thirty years at three successive  jobs, earning between five and eight dollars per  hour. Neither Carlos E. nor Carlos M., however,  offered any documentary support for their  assertions regarding their income or otherwise  accounting for how they accumulated so much  money. Both simply asserted that the money in the  accounts they claim derived from income they  saved over the years.

11
In cross-examining the Santiagos, the government  elicited testimony regarding the Santiagos'  expenses. Carlos E. admitted that he paid  property taxes, utility bills, health insurance  premiums, and thousands of dollars on health care  not covered by insurance. Carlos M. conceded that  he paid child support for two children and paid  many of the bills he and his father accumulated.  Moreover, the government successfully impeached  Carlos E. with evidence that he himself had  previously recognized (in the notebook detailing  his financial matters and in a passbook for one  of the accounts at issue) that certain funds he  claims actually belonged to Josue. Likewise, the  government successfully impeached Carlos M. with  his grand jury testimony, which omitted any  mention of the funds he claims despite questions  regarding what bank accounts he had.

12
After considering all the evidence presented at  the hearing and reviewing post-hearing briefs,  the district court issued a thorough, written  decision finding for the government. The district  court first reaffirmed its earlier oral ruling  that the government had discharged its initial  burden of establishing probable cause to believe  a nexus exists between the funds the Santiagos  claim and illegal drug activity. The court then  carefully examined the evidence in the record  regarding each account at issue. Based on this  review of the evidence, the district court  concluded that the Santiagos had met their burden  of establishing that they are the legitimate and  rightful owners of the claimed funds in five of  the accounts (one of the four Carlos M. claims,  four of the nine Carlos E. claims, containing  just under $25,000 together), but had failed to  meet their burden with respect to the remaining  eight accounts. Accordingly, the district court  released to the Santiagos the funds in the former  accounts and divested the Santiagos of their  interests in the funds in the latter accounts.  The Santiagos now appeal the district court's  rulings with respect to the funds not released to  them.

II

13
Despite the fact that this case is a criminal  drug forfeiture proceeding, the district court  and the parties have employed the legal standards  applicable to civil drug forfeitures.2 We have  doubts about whether this is correct, but neither  party makes anything of this issue nor have we  discovered any cases addressing the topic. Thus,  we will analyze the Santiagos' appeals using the  same civil drug forfeiture standards the district  court used.3

14
Under these standards, a court adjudicating a  forfeiture claim employs a burden-shifting method  of proof. 21 U.S.C. sec. 881(d), incorporating 19  U.S.C. sec. 1615; United States v. All Assets &  Equip. of West Side Bldg. Corp., 58 F.3d 1181,  1188 (7th Cir. 1995). The government has the  initial burden of establishing probable cause to  believe that the property at issue has a  connection with illegal drug activity and is  therefore subject to forfeiture. United States v.  $87,118.00 in United States Currency, 95 F.3d  511, 518 (7th Cir. 1996); All Assets, 58 F.3d at  1188. Probable cause exists if the government has  established that the totality of the  circumstances demonstrates a nexus between the  property and illegal drug activity. $87,118.00,  95 F.3d at 518; All Assets, 58 F.3d at 1188-89.  Once the government has met its burden, the  ultimate burden shifts to the claimant to prove  by a preponderance of the evidence that the  property at issue has no connection with illegal  drug activity and is therefore not subject to  forfeiture. $87,118.00, 95 F.3d at 518; All  Assets, 58 F.3d at 1189. If the claimant fails to  satisfy this burden, the government's initial  showing will suffice to support a forfeiture  order. $87,118.00, 95 F.3d at 518; All Assets, 58  F.3d at 1189.

15
The Santiagos claim that (1) the government did  not establish probable cause to believe that any  of the funds to be forfeited had a connection to  Josue's illegal drug activity and (2) they proved  by a preponderance of the evidence that the funds  belonged to them and had no connection to Josue's  illegal drug activity.4 The Santiagos'  arguments are unpersuasive, however.

A.  Probable Cause

16
As our recitation of the facts of this case  demonstrates, there is considerable evidence  establishing a nexus between the money the  government seeks to have forfeited and Josue's  illegal drug activity. This evidence includes: (1) bank records and family financial records  linking Josue to many of the bank accounts at  issue; (2) drug dealing by Josue in California  during the 1980s and in Milwaukee during the  1990s that coincided with large infusions of cash  into bank accounts held by family members; (3)  information from two confidential informants that  Josue used family members as nominees to hold  drug money in various bank accounts; (4) Josue's  and Carlos E.'s history of attempting to hide and  launder drug proceeds in California during the  1980s; (5) the constant transfer and movement of  funds between various family bank accounts and  the repeated changing of names on those accounts;  and (6) the discrepancy between legitimate income  earned by Carlos M. and Carlos E. and the amount  of money in the bank accounts each claims.

17
Contrary to the Santiagos' protests, this  evidence is not simply evidence regarding the  unexplained existence of large amounts of money  held in a suspicious manner. Contrast United  States v. $506,231 in United States Currency, 125  F.3d 442, 451-54 (7th Cir. 1997). Rather, taken  as a whole, the evidence connects Josue's known  and admitted illegal drug activity to the money  the Santiagos claim. Especially damning is the  evidence establishing Josue's practice of hiding  his drug proceeds in bank accounts held by family  members. As the evidence demonstrates a nexus  between the funds at issue and Josue's illegal  drug activity, probable cause to believe the  funds are subject to forfeiture exists.  Therefore, the district court did not err in  concluding that the government had discharged its  initial burden of proof.

B.  Preponderance of the Evidence

18
The Santiagos' effort to challenge the district  court's preponderance of the evidence ruling  fares no better than their probable cause  challenge. To begin with, the Santiagos proceed  as if the government shouldered the ultimate  burden of proof and its failure to indisputably  establish that each dollar in each account  derived from Josue's illegal drug activity  requires judgment in their favor. Of course, the  opposite is true; the burden was on the Santiagos  to establish that they own the funds at issue and  that the funds derive from legitimate sources.  See $87,118.00, 95 F.3d at 519-20; All Assets, 58  F.3d at 1190.

19
The evidence offered by the Santiagos to  establish these propositions is far from  overwhelming, however. Their evidence consists  entirely of their own self-serving statements as  to the source of the funds at issue. They offered  no independent verification of their claims.  Moreover, the district court specifically found  that neither Carlos E. nor Carlos M. testified  credibly. In light of these facts, it is  difficult to give the Santiagos' evidence much  weight at all.

20
Still, the Santiagos' evidence convinced the  district court that the funds in five of the  accounts at issue should not be forfeited. On the  other eight, however, the district court  concluded otherwise. In making these  determinations, the district court thoroughly  examined each of the accounts at issue and  carefully weighed the evidence presented by the  parties. We see no need to rehash this analysis,  as the Santiagos have brought nothing to our  attention that causes us to question the district  court's conclusions. Suffice it to say that there  is sufficient evidence to allow a fact-finder to  conclude that the money in each of the accounts  claimed by the Santiagos on appeal derived from  Josue's illegal drug activities. Cf. $87,118.00,  95 F.3d at 519-20 (rejecting challenge to  forfeiture where claimant failed to provide  credible explanation for large amounts of money  that could be linked to illegal drug activities).  Accordingly, we conclude that the district court  did not commit reversible error in ruling that  the Santiagos had not established by a  preponderance of the evidence that the funds at  issue on appeal are not subject to forfeiture.

III

21
The Santiagos' challenges to the district  court's forfeiture ruling are without merit.  Therefore, we Affirm the judgment of the district  court.

Notes:

1
 Because the defendant and the claimants all share  the same last name, we will refer to them by  their first names.

2
 In particular, instead of using the standards for  contesting a forfeiture set out in 21 U.S.C. sec.  853(n), which governs third-party challenges to  criminal forfeiture proceedings, the district  court and the parties have used the standards for  defending against a forfeiture action identified  in 21 U.S.C. sec. 881, which governs challenges  to civil forfeiture proceedings. Contrast United  States v. Messino, 122 F.3d 427, 427-28 (7th Cir.  1997) (criminal forfeiture), and United States v.  De Ortiz, 910 F.2d 376, 380-81 (7th Cir. 1990)  (criminal forfeiture), with United States v.  $87,118.00 in United States Currency, 95 F.3d  511, 518 (7th Cir. 1996) (civil forfeiture), and  United States v. All Assets & Equip. of West Side  Bldg. Corp., 58 F.3d 1181, 1188-89 (7th Cir.  1995) (civil forfeiture).

3
 It is worth noting that while the Santiagos'  appeals were pending, Congress enacted the Civil  Asset Forfeiture Reform Act of 2000, Pub. L. No.  106-185, 114 Stat. 202 (2000), which  significantly altered the standards and  procedures applicable to civil forfeiture  proceedings. This enactment, however, has no  effect on the present appeals since, with one  exception not relevant here, it applies only to  forfeiture proceedings commenced on or after  August 23, 2000. Id. sec. 21, 114 Stat. at 225.

4
 It is not entirely clear from the Santiagos'  brief whether they contest the district court's  preponderance of the evidence ruling on each of  the accounts or only on certain ones. To be on  the safe side, we assume the Santiagos challenge  the district court's ruling on each account.