The opinion of the court was delivered by: JACK B. WEINSTEIN
II. FORFEITURE PROCEEDINGS
III. MECHANICS OF ELECTRONIC FUNDS TRANSFERS
IV. FEDERAL STATUTORY CLAIMS
A. RIGHT TO FINANCIAL PRIVACY ACT
B. OMNIBUS CRIME CONTROL AND SAFE STREETS ACT
D. FOREIGN INTELLIGENCE SURVEILLANCE ACT
D. THIRD-PARTY BENEFICIARY
Modern forfeiture cases continue to reflect the legal fiction that it is the property which has committed a wrong. United States v. One Mercedes-Benz 380 SEL VIN # WDBCA33 A1BB10331, 604 F. Supp. 1307, 1312 (S.D.N.Y. 1984) ("the vehicle itself is guilty of facilitating crime"), aff'd, 762 F.2d 991 (2d Cir. 1985). As in the distant past, the accused instrument is instantaneously the property of the government when it becomes tainted with the heinous crime -- here, drug trafficking. 21 U.S.C. § 811(h) (1988 & Supp. III 1991) ("All right, title, and interest in property [seized] . . shall vest in the United States upon commission of the act giving rise to forfeiture under this section."); see cases cited infra Part III. The government, as putative owner of allegedly guilty funds, is entitled to take appropriate steps to locate the property and take it into custody. Cf. 21 U.S.C. § 881(c) (1988 & Supp. III 1991) ("Property taken or detained . . . shall be deemed to be in the custody of the Attorney General, subject only to the orders and decrees of the court or the official having jurisdiction thereof.").
As part of a suspected drug money-laundering operation, large amounts of funds were being electronically transferred from Europe to South America via New York banks. The banks cooperated with government requests, subpoenas, and court orders by stopping transmission and turning the funds over to the court. The claimants to the funds -- primarily Colombian business concerns -- sue the banks in these Bank Cases for loss of the use of their funds and other claimed violations.
The banks move to dismiss. Their argument is elementary and correct: those who assist the government are not liable to those who claim ownership of what the government contends is already forfeited by the taint of drug trafficking. Faced with competing claims to the same funds, the banks followed instructions and took the sensible step of paying the moneys into court in a form of interpleader. Even if after adjudication it is determined that the funds are not tainted, no fault can be attributed to the banks.
The electronic funds transfers at issue were seized based on complaints in United States v. All Funds on Deposit at Merrill Lynch, Pierce Fenner & Smith, Inc., CV 90-2510 (All Funds). These funds are alleged by the government to be the proceeds of illegal narcotics transactions forfeited under 21 U.S.C. § 881 et seq. (1988 & Supp. III 1991), and 18 U.S.C. § 981 et seq. (1988 & Supp. III 1991). The instant parallel private actions against manufacturers Hanover Trust, Banco Atlantico, and the Bank of New York are consolidated as the Bank Cases.
The first government document to mention these plaintiffs was the Third Amended All Funds Complaint filed July 18, 1990, with its accompanying Supplemental Warrant for Arrest of Articles in Rem issued pursuant to Rule C(3) of the Supplementary Rules for Certain Admiralty and Maritime Claims. An individual named Jose Santacruz-Londono and others working with him had allegedly "conducted extensive narcotics trafficking and money laundering enterprises, involving millions of dollars and multi-kilograms of cocaine smuggled into the United States and distributed, in part, in the New York metropolitan area."
The complaint alleged that in connection with Santacruz-Londono's narcotics trade, substantial sums of money have been deposited in, withdrawn from, and transferred to and from accounts located in the United States, including the defendant accounts, and other accounts located in Europe, Panama, and Colombia.
During the month of June 1990, three individuals believed to be connected with the Santacruz-Londono organization had been observed meeting and depositing large sums in accounts at the following places and times:
June 12 - 18 Portofino, Italy; Luxembourg City; Brussels; Copenhagen
June 20 East Berlin and West Berlin
On June 29, 1990, two of the alleged Londono compatriots were arrested on money-laundering charges. A flurry of wire transfer activity followed these arrests.
On July 12, 1990, the Eastern District of New York issued an International Letter Rogatory to the Federal Republic of Germany on information that Santacruz-Londono and others had imported and distributed cocaine in the United States and conspired to disguise the sources and ownership of the proceeds. The government claimed that the Santacruz-Londono organization was importing approximately 3,000 kilograms of cocaine a month into the United States.
A district judge of this court signed the Letter Rogatory and subsequent arrest warrants. The banks which are defendants in these Bank Cases were instructed in the Supplemental Warrants for Arrest of Articles Rem accompanying the Third through Seventh Amended Complaints filed July 18 through August 3, 1990 to attach all funds on deposit in the name of various named individuals and entities and "all related entities and individuals." The United States Attorney also requested by telephone that the banks inform him of all electronic funds transfers received for third-party beneficiaries, only some of whom were named.
From the third week of July through the month of August 1990, the banks faxed copies of each transaction to the United States Attorney, who then instructed the banks whether the beneficiaries were "related entities or individuals" and whether the transfers should be attached. The same or the next day the bank would get official notification to seize. Each of the successive Amended Complaints in All Funds named more beneficiaries as their identities became known.
There are now twenty-three claimants in All Funds, ten of whom are plaintiffs in these Bank Cases. None of the plaintiffs in the Bank Cases maintained accounts at the defendant banks. Rather, the plaintiffs were customers of Colombian banks that maintained correspondent banking relationships with the defendant banks. The defendant banks were intermediary banks between the European originating banks and the Colombian receiving banks.
To effect the wire transfers, the defendant banks were supposed to credit the Colombian banks' correspondent accounts. In turn, the Colombian banks were to advise the beneficiaries of the credits. Instead, the defendant banks complied with the requests of the United States Attorney and the ...