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UNITED STATES v. MILLAN-COLON

October 8, 1993

UNITED STATES OF AMERICA,
v.
ERIC MILLAN-COLON, et al., Defendants.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 Eric Millan-Colon ("Millan") moves, pursuant to Rules 41(e) and 12(b) of the Federal Rules of Criminal Procedure and the Second Circuit's holding in United States v. Monsanto, 924 F.2d 1186 (2d Cir.), cert. denied, 116 L. Ed. 2d 333, 112 S. Ct. 382 (1991) ("Monsanto"), for release of certain funds seized and forfeited by the Drug Enforcement Administration ("DEA") in connection with Millan's prosecution on narcotics charges, or, in the alternative, for a pretrial hearing to determine the continued propriety of restraining the funds. The Government opposes the motion, contending that the funds have been forfeited, and thus, are no longer subject to any claim for return.

 BACKGROUND1

 Millan is the lead defendant in the above-captioned case, which charges him and his co-defendants with participating in a heroin distribution conspiracy known as "Blue Thunder." On July 30, 1991, Magistrate Judge Roberts issued arrest warrants, search warrants and civil seizure warrants, pursuant to 21 U.S.C. § 881 and 18 U.S.C. § 981, based on a criminal complaint and supporting affidavit executed by Special Agent David Dongilli of the DEA. On August 1, 1991, the DEA executed the civil seizure warrants for various assets and properties belonging to Millan, including: (1) Banco Popular account number 277729 (the "Banco Popular account"), which had a balance of $ 65,178.48; and (2) Manufacturers Hanover Trust Company bank account number 0140721730-65 (the "MHTC account"), which had a balance of $ 43,332.61. Also on August 1, 1991, the DEA learned that a certified check for $ 100,000 had been drawn on the seized MHTC account. *fn2" Accordingly, on August 5, 1991, a separate civil seizure warrant was issued for the $ 100,000 certified check.

 On August 2, 1991, this Court entered a pre-indictment, ex parte restraining order, pursuant to the criminal forfeiture statute, 21 U.S.C. § 853(e)(2), *fn3" preventing the transfer or dissipation of certain assets held by various defendants, including the MHTC and Banco Popular accounts. The temporary restraining order provided, in relevant part, that Millan shall not

 See Temporary Restraining Order Pursuant to 21 U.S.C. § 853(e)(2) and 18 U.S.C. § 982, dated August 2, 1991, at 6-8. The restraining order was served on Banco Popular and Manufacturers Hanover on August 3, 1993. *fn4"

 On August 14, 1991, a grand jury sitting in the Southern District of New York returned an indictment charging Millan with, among other things, participating in a heroin distribution conspiracy. The indictment also included a criminal forfeiture count for "all cash and monies of defendant[] ERIC MILLAN", derived as proceeds from, or used to facilitate drug violations, pursuant to 21 U.S.C. §§ 853(a)(1) and (a)(2). See Indictment, 91 Cr. 685 (SWK) PP 3(d), 3(g), 5(d) and 5(g).

 On August 16, 1991, following the indictment of Millan and thirty-five other defendants on narcotics-related charges, the Government obtained a post-indictment, pre-trial restraining order, pursuant to the criminal forfeiture provision, 21 U.S.C. § 853(e)(1)(A), *fn5" preventing the transfer or dissipation of certain property interests held by Millan. This order also provided that Millan

 
shall not, without further order of this Court and upon seventy-two hours written notice to the United States, transfer, sell, assign, pledge, hypothecate, encumber, dissipate or move in any manner, property or other interest belonging to or owed to any of the defendants.

 See Restraining Order Pursuant to 21 U.S.C. § 853(3)(1)(A), dated August 16, 1991, at P 1. Manufacturers Hanover and Banco Popular were both listed as two of the financial institutions where Millan maintained his accounts. *fn6" Id. at P b(4) & b(14).

 Two months after the entry of the August 16, 1991 criminal restraining order, the DEA began administrative forfeiture actions with respect to Millan's assets. Thus, on October 28, 1991, the DEA sent "notice of seizure" letters by certified mail, return receipt requested, to Millan at his home address and at the Metropolitan Correctional Center (the "MCC"), where he was incarcerated. These letters indicated that the Banco Popular and MHTC accounts would be forfeited pursuant to the civil forfeiture statute, 21 U.S.C. § 881. Although the letter sent to Millan's home was returned to the DEA with the envelope stamped "Authorized Time For Forwarding Address Has Expired," the letter sent to Millan at the MCC was received on November 2, 1991, as evidenced by the signed postal receipt card.

 Beginning on November 6, 1991, and for three successive weeks thereafter, the DEA also published notice of the seizure of the Banco Popular and MHTC accounts in USA Today, pursuant to 21 C.F.R. § 1316.75. The "notice of seizure" letters and newspaper publication explained the procedure for contesting the forfeiture action in United States District Court, including the option of filing a petition for remission or mitigation, and also stated that November 26, 1991, was the last day to file a claim contesting the forfeiture of the seized funds.

 On December 12, 1991, when no claim had been received regarding either account, the DEA issued a Declaration of Forfeiture as to each account, reflecting the administrative forfeiture of the accounts to the United States, pursuant to 19 U.S.C. § 1609. *fn7"

 As to the $ 100,000 certified check drawn on the MHTC account, on November 4, 1991, the DEA sent Millan a "notice of seizure" letter by certified mail, return receipt requested. Apparently, this letter was received as the postal receipt card was returned. Beginning on November 6, 1991, and for three successive weeks thereafter, the DEA published a notice of seizure of the $ 100,000 certified check in USA Today, pursuant to 21 C.F.R. § 1316.75. On April 2, 1993, when no claim had been filed regarding the $ 100,000 check, the DEA issued a Declaration of Forfeiture, administratively forfeiting the funds pursuant to 19 U.S.C. § 1609.

 Claiming to need additional funds to pay his attorney's fees in his criminal case, Millan now seeks the release of $ 208,511.09, consisting of the $ 100,000 certified check and the funds contained in the Banco Popular and MHTC accounts. The Government opposes Millan's request on the grounds that the seized funds were not merely restrained, but also forfeited, pursuant to the civil forfeiture provisions set forth in 21 U.S.C. § 881, *fn8" and that Millan has been afforded a full and fair opportunity to challenge that forfeiture. According to the Government, as Millan failed to exercise his right to challenge the forfeiture in a timely fashion, the funds are no longer available for release.

 DISCUSSION

 There are two types of forfeiture proceedings in federal law: criminal and civil. The first type of proceeding, criminal forfeiture, is an action against the defendant in a criminal case and is imposed as a sanction following the defendant's conviction. See 21 U.S.C. § 853. Specifically, section 853(a) provides that a person convicted of offenses contained in an indictment "shall forfeit . . . any property" derived from the commission of the charged offenses. 21 U.S.C. § 853(a); United States v. Monsanto, 491 U.S. 600, , 109 S. Ct. 2657, 2662, 105 L. Ed. 2d 512 (1989). If the defendant is found guilty of the underlying offense, a special verdict must be returned with respect to the forfeiture allegations and a judgment of forfeiture entered.

 The second type of forfeiture proceeding is civil. Pursuant to 21 U.S.C. § 881(a)(6), "all moneys, negotiable instruments, securities, or other things of value" traceable to narcotics trafficking may be civilly seized by the Government and forfeited. Similarly, 18 U.S.C. § 981(a)(1)(A) provides for the forfeiture of any property "involved in a transaction or attempted transaction" in violation of federal money laundering statutes, 18 U.S.C. §§ 1956, 1957. For property valued at $ 500,000 or less, the Government may follow an administrative forfeiture process. See 19 U.S.C. § 1607(a) (as amended); Onwubiko v. United States, 969 F.2d 1392, 1398 (2d Cir. 1992).

 An administrative forfeiture proceeding begins with publication by the DEA of a notice of seizure and intent to forfeit property and transmission of written notice of seizure to "each party who appears to have an interest in the seized property." See 19 U.S.C. § 1607; Onwubiko v. United States, 969 F.2d at 1398. Once the administrative forfeiture proceeding has commenced, a claimant has twenty days from the first publication of notice to --contest the forfeiture by filing a claim and cost bond. See 28 C.F.R. §§ 9.1-9.7; 21 C.F.R. §§ 1316.71-.81; Onwubiko v. United States, 969 F.2d at 1398. The filing of a claim and cost bond halts the administrative process and converts the proceeding into a civil forfeiture action in federal district court. See 19 U.S.C. § 1608; 21 C.F.R. § 1316.78; Onwubiko v. United States, 969 F.2d at 1398. If no timely claim and cost bond is filed within the twenty day period, however, the property is administratively forfeited, pursuant to 19 U.S.C. § 1609. See Onwubiko v. United States, 969 F.2d at 1398; United States v. One Tintoretto Painting Entitled "The Holy Family with St. Catherine and Honored ...


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