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UNITED STATES v. PUELLO

March 1, 1993

UNITED STATES OF AMERICA,
v.
FELIX ANTONIO PUELLO, et al., Defendants, and ALL ACCOUNTS, FUNDS, SAFE DEPOSIT BOXES and OTHER THINGS OF VALUE HELD IN THE NAME OF OR FOR THE BENEFIT OF PUELLO MEATS and PROVISION, INC., et al., Defendants-in-rem.



The opinion of the court was delivered by: DENIS R. HURLEY

 HURLEY, District Judge

 In the above-referenced civil forfeiture action pursuant to 18 U.S.C. § 981, the government seeks a warrant authorizing it to seize the defendant real property and vehicles. *fn1" The government claims there is probable cause to believe these items were used in violation of 18 U.S.C. §§ 1956 and 1957. Defendant and defendants-in-rem have cross-moved for, inter alia, an order pursuant to Fed. R. Civ. P. 26(c) staying this action pending the disposition of a related criminal proceeding. The Court grants the government's motion for the reasons stated below. Defendant's cross-motion is granted to the extent that the final forfeiture proceeding will not be held until the disposition of the criminal case, as explained below. The remainder of defendant's cross-motions are denied.

 BACKGROUND

 The complaint in the above-referenced action alleges that Felix Puello devised and executed a scheme to acquire, exchange and redeem illegally acquired food stamps. Amended Complaint P 19. More specifically, the complaint makes the following allegations with respect to how Mr. Puello accomplished these illegal redemptions: Puello Meats, an unauthorized wholesaler owned and/or controlled by Felix and his wife, Carmen Puello, was at one time authorized to accept food stamps, but its authorization was revoked in or around May of 1982, id. PP 20-22, pursuant to 7 C.F.R. § 278.1(c)(6). *fn2" In spite of this, Puello Meats has been accepting substantial quantities of food stamps in exchange for its wholesale transactions since April of 1990. Id. P 23. In fact, between 95% and 100% of Puello Meats' customers pay for wholesale purchases with food stamps. Id. P 24.

 According to the complaint, Pueblo Market, also owned by Felix Puello, is a purported retail business which was authorized to accept food stamps in or around April of 1990. Id. P 22. Felix Puello allegedly used Pueblo Market to redeem the food stamps collected by Puello Meats. Id. P 26. Food stamps illegally acquired by Puello Meats and amounting to approximately $ 40 million have been deposited by Felix Puello and others into one or more bank accounts in the name of Pueblo Market. Id. P 28. With each deposit of food stamps into the account of Pueblo Market (approximately 509), Felix Puello filed a redemption certificate certifying that "the food coupons redeemed were accepted in accordance with Food Stamp Program Regulations." Id. P 30. In addition to those food stamps redeemed through the Pueblo Market account, a quantity of food stamps illegally accepted by Puello Meats was discounted for cash by Felix Puello. Id. P 37.

 The government also alleges that the defendant properties have been used by Felix Puello and others to facilitate the above-described scheme, and that the defendant vehicles were used to "store, carry deliver and transport items sold or exchanged for food stamps by Puello Meats and large quantities of food stamps generated by the wholesale operations of Puello Meats." Id. P 41.

 On November 9, 1992, the Court issued an order to defendants in this action to appear before the Court and show cause why a seizure warrant should not issue and why the United States Marshal for the Eastern District of New York should not execute the warrant, thereby seizing the defendant property and detaining the property during the pendency of this action. On December 10, 1992, all parties appeared before the Court on this case. The above allegations were largely undisputed by defendant, either in papers or on the record during defendant's appearance. *fn3"

 After the December 10 proceeding, the only material fact that was in issue was whether the illegal operation described above has continued beyond defendant's arrest. Accordingly, the Court ordered and conducted a hearing on this sole issue on December 23, 1992. At the close of this hearing, the Court directed the parties to submit post-hearing briefs on whether the evidence established continuing criminal activity. *fn4" The Court is currently in receipt of those submissions, as well as defendant's supplemental submission containing additional cross-motions.

 DISCUSSION

 I.

 A. Statutory Framework

 Section 981 of Title 18 provides, in pertinent part, that "any property, real or personal, involved in a transaction or attempted transaction in violation of . . . section 1956 or 1957 of this title, or any property traceable to such property", is subject to forfeiture to the United States. 18 U.S.C. § 981(a)(1)(A).

 Section 1956 provides for criminal penalties for an individual who, "knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involved the proceeds of specified unlawful activity -- with the intent to promote the carrying on of specified unlawful activity." 18 U.S.C. § 1956(a)(1)(A)(i). Section 1957 provides for criminal punishment for an individual who "knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $ 10,000 and is derived from specified unlawful activity." 18 U.S.C. § 1957(a). Both sections 1956 and 1957 provide that a number of Title 18 crimes constitute "specified unlawful activity", including violations of section 641 (theft of public money, property or records), 1341 (mail fraud) and 1343 (wire fraud). See 18 U.S.C. § 1956(c)(7)(D) and § 1957(f)(3).

 B. Probable Cause

 In a civil forfeiture action, the government bears the burden of demonstrating the existence of probable cause that a substantial connection exists between the property to be forfeited and the illegal activity. See United States v. Four Million Two Hundred Fifty-Five Thousand, 762 F.2d 895, 903 (11th Cir. 1985); United States v. $ 175,260, Civ. No. 86-1959, slip op. at 4 (E.D.N.Y. June 27, 1990). Probable cause is demonstrated when there are reasonable grounds for the belief that the property in question is connected to illegal activity, and the reasonable grounds are "supported by more than mere suspicion, but less than prima facie proof." $ 175,260, slip. op. at 5 (citing United States v. One 1978 Chevrolet Impala, 614 F.2d 983, 984 (5th Cir. 1980) (per curiam)). In addition, "circumstantial evidence and inferences therefrom can suffice to support a finding of probable cause", as can hearsay evidence, as long as the evidence is "judged with a common sense view of the realities of normal life". $ 175,260, slip. op. at 5 (citing United States v. Four Million Two Hundred Fifty-Five Thousand, 762 F.2d at 904).

 Defendant has not offered any evidence to counter the government's showing. In fact, defendant has not denied that he accepted food stamps in exchange for wholesale quantities of food, that employees of Puello Meats sold wholesale quantities of food to undercover government agents, and that these food stamps were fraudulently redeemed through a shell entity called Pueblo Meat Market. Moreover, defendant does not dispute that the defendant buildings house his business operation nor that the defendant trucks are used in connection with that business. Accordingly, the Court finds that there is probable cause that the defendant property in this action has been used illegally.

 (i) The Specificity of the Complaint

 Although, as stated, defendant does not take issue with the government's contention that he was engaged in illegal activity, he does argue that because the government did not state the circumstances from which the claim arose with "particularity", the government has failed to comply with the mandate of Rule E(2)(a) of the Supplementary Rules. Moreover, he maintains that the government has failed to establish the required nexus between the alleged illegal activity and each specific item of property it seeks to seize. Accordingly, he submits that even if, arguendo, some aspects of his business are related to illegal activity, the government cannot seize his entire business.

 Rule E(2)(a) prescribes that the complaint in a forfeiture action "shall state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading." Thus, a defendant must be "adequately apprised of the factual circumstances underlying the forfeiture action." United States v. 4492 Livonia Road, 889 F.2d 1258, 1266 (2d Cir. 1989).

 In this case, the Amended Complaint alleges, inter alia, that the defendant real property, which includes the principal places of business of Pueblo Market and Puello Meat, were used to facilitate the illegal scheme, and that the defendant vehicles were used to deliver and transport quantities of food and food stamps in furtherance of the scheme. Amended Complaint PP 38-41. In the Courts view, these allegations, combined with specific allegations regarding the nature of the illegal activity, are sufficient to enable ...


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