assets covered by the proposed restraining order are subject to forfeiture upon conviction of the defendants for narcotics felonies." Aug. 16th Levin Aff. at P 1 (emphasis added); see also id. at P 17 ("Upon conviction of the defendants and a forfeiture verdict, the Government will be entitled to [sic] as a matter of law to forfeiture of certain property set forth in the Indictment.") (emphasis added); id. at P 19 ("Such properties are subject to forfeiture upon the defendants' convictions") (emphasis added); id. at P 21 (the properties subject to forfeiture "upon the conviction of the defendants is the defendants' money and any other interest in any account, certificate or safe deposit box maintained at any main or branch office of the following financial institutions, including . . . Manufacturers Hanover and Banco Popular.") (emphasis added); id. at P 28 ("upon their convictions, the Government will be entitled to a judgment against each defendant of forfeiture in excess of $ 100,000,000.00.") (emphasis added); id. at P 42 ("By entry of this restraining order, the Government merely seeks to maintain the status quo and avoid dissipation of assets that will be forfeited to the United States upon a verdict.") (emphasis added).
Unlike section 853, however, section 881 provides that as title to the property vests in the United States upon commission of the act giving rise to forfeiture, see 21 U.S.C. § 881(h), the property may be civilly seized and then forfeited "promptly" without first obtaining a criminal conviction, see 21 U.S.C. § 881(b). See also United States (Drug Enforcement Agency) v. One 1987 Jeep Wrangler Auto. VIN No. 2 BCCL8132HBS2835, 972 F.2d at 476 (in a civil forfeiture proceeding, the government need not establish that the owner committed a crime, but rather, must only demonstrate probable cause establishing a nexus between the seized property and illegal drug activity); $ 876,915.00, 874 F.2d at 108 (recognizing that §§ 853 and 881 operate under different legal standards); Cf. United States v. Schmalfeldt, 657 F. Supp. 385, 395 (W.D. Mich. 1987) (no inconsistency found between 21 U.S.C. §§ 853 and 881 where defendant is not convicted, as § 853 forfeiture could not take place and subsequent § 881 civil forfeiture could then proceed). Accordingly, section 881's provision for forfeiture before conviction would appear to be inconsistent with section 853, and thus, inappropriate where assets are restrained criminally.
Furthermore, the Court is swayed by Judge Kaufman's belief that it is unseemly for two courts to vie for control of the same property at the same time. See $ 876,915.00, 874 F.2d at 108. The Court finds that this conflict is no less unseemly, merely because a court and a federal agency are attempting to simultaneously control the same property. In fact, in the case at hand, given that the DEA never had exclusive legal control over the res, as required for in rem jurisdiction, the Court questions whether the DEA had authority to forfeit Millan's funds.
As discussed previously, see footnote 10, supra, at 15, administrative forfeitures such as the one here, are in rem proceedings against the property. United States (Drug Enforcement Agency) v. One 1987 Jeep Wrangler Auto. VIN No. 2 BCCL8132HBS12835, 972 F.2d at 476. "Thus, like a court entertaining an in rem action, the federal agency undertaking the administrative forfeiture proceeding must have physical control over the property to be forfeit." Scarabin v. Drug Enforcement Admin., 966 F.2d 989, 993 (5th Cir. 1992). Here, however, the Court had issued a temporary criminal restraining order on August 2, 1991, preventing the transfer, sale, assignation or other disposition of Millan's assets, including funds held in the Banco Popular and MHTC accounts. Three days later, after the criminal restraining order was imposed and the funds frozen, the DEA then civilly seized the $ 100,000 and commenced administrative forfeiture proceedings. Although the Government would have the Court believe that the August 2, 1991 criminal restraining order did not apply to the $ 100,000 check, and thus, did not divest the DEA of in rem jurisdiction, the Court is unable to make that determination as the check may, or may not have been deposited in the MHTC account. See footnote 2, supra, at 2-3 (noting that the Government has represented both that the $ 100,000 was being drawn from and deposited to the MHTC account). Thus, given the state of the record, the DEA's authority to seize this money and then forfeit it, is far from clear.
Moreover, the Court is unconvinced by the Government's contention that "to the extent that the Court in $ 876,915 questioned the propriety of parallel civil and criminal forfeiture proceedings, the Second Circuit in the instant case has specifically endorsed the use of contemporaneous civil and criminal actions in this case." Levin. Let. at 4 n.2 (citing United States v. Millan, 2 F.3d 17, (2d Cir. 1993) ("Millan"). In Millan, the Second Circuit upheld this Court's denial of defendants Alfred V. Bottone, Anthony Bottone and Alfred Bottone, Jr.'s motion to dismiss the indictment on the grounds of double jeopardy. After an indictment was filed on August 14, 1991, charging the defendants with, inter alia, participation in a narcotics distribution conspiracy, the Government commenced civil forfeiture against the properties and bank accounts of Alfred Bottone, Jr. Id., slip op. at 2. Thereafter, on January 20, 1993, the Bottones entered into an agreement with the Government, wherein the Government relinquished its claim to $ 101,000 to enable the Bottones to pay attorneys' fees arising from their defense of both the civil and criminal actions. Id. In return, the Bottones relinquished any claim to $ 240,000 in assets, and the civil suit was dismissed. Id., slip op. at 2-3. On February 23, 1993, the Bottones moved to dismiss the criminal indictment on the grounds that the agreement entered into with the Government was a prior punishment, precluding the Government, under the Double Jeopardy Clause of the Fifth Amendment, from continuing to prosecute them. Id., slip op. at 3. Affirming this Court's February 25, 1993 Order, the Second Circuit denied the Bottones' motion, finding instead, that "the government has employed a single proceeding to prosecute the Bottones, and therefore, the proscription of the Double Jeopardy Clause does not apply." Id., slip op. at 7.
The Second Circuit did not reach the issue presented here, however, and thus, did not address whether assets criminally restrained by way of 21 U.S.C. § 853 may be simultaneously forfeited civilly pursuant to 21 U.S.C. § 881. In fact, in Millan, the civil suit against the Bottones' assets was dismissed and the assets released by way of a modified post-indictment restraining order. See Stipulation and Order, dated Jan. 20, 1993; see also Amended Restraining Order Pursuant to 21 U.S.C. § 853(e)(1)(A), dated Feb. 5, 1993; Declaration of Assistant United States Attorney Ellen Silverman Zimiles, executed on Feb. 5, 1993, at PP 4(f), 4(g), & 4(h). Thus, the Second Circuit's holding that the Government may seek both civil and criminal sanctions against one individual without triggering Double Jeopardy concerns, see Millan, slip op. at 9, sheds no light on the matter at hand.
Similarly, United States v. Schmalfeldt, 657 F. Supp. 385, 394 (W.D. Mich. 1987) is distinguishable in that administrative proceedings, brought against property alleged to be criminally forfeitable pursuant to a superseding indictment, were never completed. In Schmalfeldt, the DEA commenced administrative forfeiture proceedings against two parcels of real estate which were also forfeitable under 21 U.S.C. § 853(a)(2). Id. at 386. Following his conviction, the defendant moved to dismiss criminal forfeiture proceedings involving the same two parcels of real estate on the ground that concurrent civil and criminal forfeiture proceedings violate due process. Id. at 387, 391. Pointing to 21 U.S.C. § 881(i), which indicates that civil and criminal forfeiture proceedings may be pending at the same time and provides a method for first proceeding with criminal forfeiture,
the government responded that the civil proceedings were stayed. Id. at 391-92. Construing the defendant's argument as one of double jeopardy or collateral estoppel, the court held that, as the civil forfeiture proceedings commenced by the government under 21 U.S.C. § 881 were never completed -- and no judgment entered -- subsequent criminal forfeiture proceedings involving the same property were not violative of due process. Id. at 393. Hence, Schmalfeldt, like Millan, is not controlling as it does not address whether civil forfeiture of assets, which remain subject to criminal restraint under 21 U.S.C. § 853, violates due process.
As a final note, the Court is concerned by the Government's virtually unchecked use of the forfeiture statutes and its ability to freeze assets criminally, without notice and a hearing, and then, forfeit them administratively without the Court's review. This result is particularly troublesome when, as here, the forfeiture provisions in the indictment and restraining orders, reach nearly all property belonging to the defendant, and are able to strip him of funds necessary to retain counsel. As the record is devoid of any evidence of express Government misconduct, however, the Court's concern is noted only in passing. Thus, the Court merely determines that on the facts before it, as long as a criminal restraining order remains in effect pursuant to 21 U.S.C. § 853, assets restrained pursuant to that section may be forfeited in the event of conviction, and not at some earlier time by administrative action. Accordingly, as Millan has not been tried in this case, nor convicted of any crime in this action, the assets have not been forfeited pursuant to 21 U.S.C. § 853, and instead, remain frozen.
B. The Monsanto Claim
Having determined that the funds remain restrained under 21 U.S.C. § 853 and not forfeited pursuant to § 881, the Court must next decide whether Millan is entitled to a Monsanto hearing to address the continued propriety of the restraint in question.
In Monsanto, the Government, in connection with an indictment charging Peter Monsanto with RICO, narcotics, and firearms violations, obtained an ex parte restraining order under 21 U.S.C. § 853(e)(1)(A), prohibiting Monsanto from directly or indirectly transferring or encumbering a home, an apartment, and $ 35,000 cash alleged to be property obtained from narcotics offenses. Monsanto, 924 F.2d at 1189. In August 1987, Monsanto moved to vacate or modify the restraining order, seeking permission to use the restrained assets to retain trial counsel. Id. Following remand by the Supreme Court, see United States v. Monsanto, 491 U.S. 600, 105 L. Ed. 2d 512, 109 S. Ct. 2657 (1989), the Second Circuit held that "after an ex parte, post-indictment, pretrial restraining order is entered pursuant to 21 U.S.C. § 853 (e)(1)(A) (1988), 'a pre-trial adversary hearing is required where the question of attorney's fees is implicated.'" United States v. Monsanto, 924 F.2d at 1191 (quoting United States v. Monsanto, 836 F.2d 74, 82 n.7 (2d Cir. 1987)). At that hearing, the Government need establish by probable cause that (1) the defendant committed crimes that provide a basis for forfeiture; and (2) the assets specified in the indictment are properly forfeitable. 924 F.2d at 1195.
The only issue to be considered would be the question of probable cause. If the government succeeds in establishing probable cause, the policies favoring forfeiture, . . . preclude any constitutional requirement that equities be further weighed or balanced on the issue of making funds available to retain counsel.
Id. at 1196 (citation omitted).
In the case at hand, Millan's assets, which he claims are necessary in order to retain private counsel of his choice, are currently restrained pursuant to an "ex parte, post-indictment, pretrial restraining order." Id. at 1191. Thus, this case appears to raise the same concerns as Monsanto, namely, whether the Government can tie up a defendant's assets in a forfeiture proceeding, claiming that the assets are proceeds of the very crime against which the defendant is attempting to defend himself, and thus, preclude a defendant from hiring an attorney of his choice. See $ 876,915.00, 874 F.2d at 107 (construing Monsanto).
The Government argues, however, that Millan received notice of the administrative proceedings, yet failed to challenge the forfeiture of the accounts in question until after he sought to retain new counsel. Thus, the Government contends that, in the interest of "finality," Millan should be deemed to have waived his right to challenge the forfeiture proceedings by way of a Monsanto hearing. The Court disagrees.
A close reading of the Monsanto opinion indicates that the Second Circuit was concerned, not only that the defendant's sixth amendment right to counsel be preserved, but also, that the defendant not be deprived of his property without an opportunity to be heard. Monsanto, 924 F.2d at 1195.
The inherent risk in allowing the deprivation of a property interest through ex parte proceedings accounts for the general rule that a prior adversary hearing is required, absent special circumstances. It follows that there is a substantial risk of an erroneous deprivation of a defendant's significant property interest in the absence of an opportunity to be heard after the ex parte entry of a restraining order under section 853(e)(1)(A).
Accordingly, the Second Circuit found that as "[a] fundamental requirement of due process is 'the opportunity to be heard,'" id. (quoting Grannis v. Ordean, 234 U.S. 385, 394, 58 L. Ed. 1363, 34 S. Ct. 779 (1914)), lack of an adversarial hearing on the restraint issue would constitute a violation of due process. Id. The Second Circuit found further, however, that the opportunity to be heard "must be granted at a meaningful time and in a meaningful manner." 924 F.2d at 1195 (quoting Armstrong v. Manzo, 380 U.S. 545, 552, 14 L. Ed. 2d 62, 85 S. Ct. 1187 (1965)).
In the case at hand, Millan was provided notice and an opportunity to contest the forfeiture of the seized assets in 1991 when the assets were first seized. Notice was provided by way of "notice of seizure" letters indicating that the Banco Popular and MHTC accounts would be forfeited. See Snider Dec. at PP 4(d), 5(b), 5(f). The DEA also published notice of the seizure and pending forfeiture in USA Today. Id. at PP 4(e), 5(e), 6(f). The "notice of seizure" letters and newspaper publications explained the procedure for contesting the forfeiture action in United States District Court, and also stated that November 26, 1991, was the last day to file a claim contesting the forfeiture of the seized funds. Id. At no point, however, did Millan challenge the forfeiture of the accounts in question during the pendency of the DEA's administrative forfeiture proceedings.
Subsequently, after the time to oppose the DEA's actions had expired and the forfeiture was complete, Millan's counsel was indicted and then convicted of federal felony charges in the District of New Jersey. Thereafter, at a conference held before the Court on April 7, 1993, Millan reported that he was in the process of interviewing new counsel, but was not financially able to retain any of them. Millan represented further that his former counsel had not been paid. Millan then filed the instant motion seeking release of $ 208,511.09 in order for him to retain substitute counsel to defend the pending criminal action.
Although, as the Government maintains, Millan was provided notice and an opportunity to be heard back in 1991, the Court finds that this opportunity for a hearing was not meaningful in the context of Monsanto. See Bell v. Burson, 402 U.S. 535, 541-42, 29 L. Ed. 2d 90, 91 S. Ct. 1586 (1971) ("the hearing required by the Due Process Clause must be 'meaningful,' and 'appropriate to the nature of the case.'") (citations omitted). In 1991, when the assets were first seized, Millan had funds sufficient to retain private counsel. Since that time, however, Millan's counsel has withdrawn from the case. As a result, Millan now finds himself in the identical situation encountered in Monsanto - he desires to hire an attorney to defend him against the criminal charges, but is unable to do so because his assets are tied up in a forfeiture proceeding. In this light, the opportunity for an administrative hearing before Millan's counsel withdrew was not meaningful. Accordingly, the Court is of the view that an adversarial post-restraint "probable cause" hearing is appropriate at this time.
Before a hearing is scheduled, however, the Government shall be given an opportunity to establish by a fair preponderance of credible evidence that Millan has access to or possession of funds or assets, other than those restrained, sufficient to enable him to retain private counsel. United States v. All Funds on Deposit in Any Account at Certain Financial Institutions Held in the Names of Certain Individuals, 767 F. Supp. 36, 42 (E.D.N.Y. 1991). If the Government presents evidence that Millan has access to sufficient unattached funds, no Monsanto hearing will be necessary. Id. If, however, the Government fails to present such evidence, the Court will conduct a Monsanto hearing to determine whether there is probable cause that (1) Millan committed crimes that provide a basis for forfeiture; and (2) the assets specified in the indictment are properly forfeitable. At the hearing the Court will consider evidence that might otherwise be inadmissible under the Federal Rules of Evidence. Id.
For the reasons set forth above, the Court finds that (1) Banco Popular account number 277729, containing a balance of $ 65,178.48; (2) MHTC bank account number 0140721730-65, containing a balance of $ 43,332.61; and (3) $ 100,000 certified check drawn on the seized MHTC account, are still restrained pursuant to an ex parte, post-indictment, pretrial restraining order entered pursuant to 21 U.S.C. § 853. Accordingly, the Court finds further that the Government shall have ten days from the date of this order to submit credible evidence that Millan has access to or possession of unrestrained funds sufficient to retain private counsel. Failure to present such evidence will result in the scheduling of a hearing, pursuant to the Second Circuit's decision in United States v. Monsanto, 924 F.2d 1186 (2d Cir.), cert. denied, 116 L. Ed. 2d 333, 112 S. Ct. 382 (1991), where the Court will determine whether there is probable cause that Millan committed crimes that provide a basis for forfeiture and that the properties specified as forfeitable in the indictment are properly forfeitable.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
October 8, 1993