UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
September 30, 1998
UNITED STATES OF AMERICA, Plaintiff, against FUNDS HELD IN THE NAME OR FOR THE BENEFIT OF JOHN HUGH WETTERER, AND/OR ASOCIACION AMIGOS DEL LOS NINOS HOGAR MI CASA, A/K/A MI CASA, AT BANK INTERNATIONAL AND STERLING BANK, INCLUDING BUT NOT LIMITED TO BANK OF AMERICA ACCOUNT NUMBERS IF 1119-9984, 162232 IBF, 10201-01-1, AND B-58-05616, LLOYDS BANK INTERNATIONAL BANK NUMBER 00070891 (NASSAU BRANCH) AND STERLING BANK ACCOUNT NUMBERS 907-103 AND CD 15590 AND ALL RELATED ACCOUNTS AND FUNDS, Defendants.
The opinion of the court was delivered by: SPATT
MEMORANDUM DECISION AND ORDER
SPATT, District Judge.
This may be the final chapter -- at least at the trial level -- of the continuing Wetterer saga, which has gone on for almost ten years and traversed two continents.
It is a disturbing tale. In the 1970's, Wetterer, a United States citizen and veteran of the Vietnam War, settled -- permanently, as it turned out -- in Guatemala, where he founded an orphanage for homeless boys called "Mi Casa." From then to the present, Wetterer has been Mi Casa's director, organizer and policy-maker. In this capacity, Wetterer mailed newsletters to potential donors in the United States and abroad in an effort to raise funds for the Mi Casa orphanage. These newsletters painted a glowing portrait of Mi Casa as a wholesome, safe and secure environment for the boys in Wetterer's care. In reality, however, Wetterer physically abused and humiliated many of these boys by ordering them to strip naked in front of their peers and striking them on their bare buttocks with a paddle. Wetterer's "favorites" among these homeless children fared even worse: he sexually molested them.
When the United States was frustrated in its efforts to extradite Wetterer for the crime of mail fraud stemming from his fund-raising efforts, the Government initiated this civil forfeiture action against his American bank accounts. This opinion embodies the Court's findings of fact and conclusions of law after a non-jury trial.
John Hugh Wetterer, a former Long Island resident, is a Vietnam War veteran who founded an orphanage in Guatemala City in 1976 called Mi Casa. Wetterer was assisted in financing the operation of the orphanage by the American Friends of Children ("AFC"), an organization he and several others founded on Long Island to raise money to serve the needs of children.
From 1976, when Wetterer opened Mi Casa, to 1988, AFC's treasurer, Daniel Mackey, sent Wetterer over one million dollars in donations to assist him in housing, clothing, feeding and educating the boys of Mi Casa. Mackey received these donations by mail at a Post Office box he set up and maintained for that express purpose in Massapequa, New York. He deposited the donations in the Chase Manhattan Bank of New York, and then, pursuant to Wetterer's instructions, made out checks payable to "John Wetterer" that were forwarded to Bank of America account no. 05616 in Miami, Florida. Wetterer made arrangements to transfer the money from Miami to Guatemala. Although the Bank of America account was maintained in the name of Mi Casa, Wetterer was the sole signatory on the account.
Wetterer sent newsletters about Mi Casa to his supporters in the United States and elsewhere, including France. These newsletters portrayed Mi Casa as a normal, well-run orphanage, where abandoned, impoverished and neglected boys were given a chance for a better life by receiving shelter, clothing, food, medical care and education. Included in these newsletters were envelopes for supporters to send donations to the Post Office box Dan Mackey maintained. Mackey received donations to Mi Casa in these envelopes as a result of the newsletters. In the newsletters, Wetter openly discussed the use of the mails to send financial or other support, repeatedly thanked donors for the financial support he received from them, and from time to time, mentioned the need for financial support.
In late 1987, one of the boys who lived at Mi Casa, Manuel Bravo, revealed to his American sponsor, Mary Tyre, that Wetterer had sexually molested him. A similar revelation was made several months later by another boy from Mi Casa, Leonel Piedrasanta, who also was staying with Mary Tyre. Mary Tyre, in turn, contacted the television news program Sixty Minutes, which, in the Fall of 1988, was preparing to air a complimentary segment on Mi Casa and the work of John Wetterer. Sixty Minutes hired its own expert, Dr. Simon Miranda, to evaluate these claims of sexual abuse. In late November 1988, Sixty Minutes journalist Diane Sawyer confronted Wetterer with the allegations of sexual abuse. Shortly thereafter, AFC stopped depositing donations in the Bank of America account and ended its financial support of Mi Casa. Wetterer then arranged to receive donations for Mi Casa through a Post Office box in Spring, Texas.
On February 19, 1989, Sixty Minutes aired its segment on Mi Casa, including Sawyer's interview with Wetterer and the allegations of sexual abuse. Wetterer denied the allegations of sexual abuse orally and in his newsletters. According to Mi Casa's records introduced into evidence as Def. Ex. W, during the period from January 4, 1989 through November 12, 1990, a total of approximately $ 1,111,073.69 in donations were sent to Wetterer and Mi Casa.
On September 14, 1990, a criminal complaint charging Wetterer with, among other crimes, mail fraud, was filed in the Eastern District of New York. On the same date, a warrant was issued for Wetterer's arrest. Wetterer was accused of knowingly devising a scheme or artifice to obtain money or property by false pretenses and representations and in using the U.S. mails to execute his scheme, in violation of 18 U.S.C. § 1341. On February 12, 1991, Wetter was indicted and charged with mail fraud and a related crime.
On January 22, 1991, the United States commenced this civil action, seeking the forfeiture of certain bank accounts held in the name of the Asociacion or Wetterer pursuant to 18 U.S.C. § 981. The in rem complaint listed as the alleged crimes underlying the basis for the seizure mail fraud, 18 U.S.C. 1341, and inducing a person to travel in interstate or foreign commerce for the purpose of engaging in criminal sexual activity, 18 U.S.C. § 2422. An arrest warrant in rem authorizing the seizure of the bank accounts was issued that same day.
On February 6, 1991, the Asociacion that allegedly operates Mi Casa filed a claim to the defendant funds, stating that these funds were deposited for the use and benefit of the Asociacion. On September 19, 1995, this Court found that the Asociacion is the alter ego of Wetterer and struck its claim. United States v. Funds Held In the Name Or For The Benefit of John Hugh Wetterer, 899 F. Supp. 1013 (E.D.N.Y. 1995).
This case was tried by the Court beginning on February 19, 1997 and concluding on February 6, 1998.
II. THE FORFEITURE COMPLAINT
On January 22, 1991, the Government commenced this civil forfeiture action pursuant to 18 U.S.C. § 981, and seized the funds on deposit in Bank of America account number 05616 in the name of Mi Casa; Sterling Bank account number 907-103 in the name of Mi Casa; and Sterling Bank account CD 15590 in the name of John Wetterer. As of February 1997, the aggregate amount of money in these accounts is, according to the Government, the sum of $ 109,327.22.
The complaint alleges that these accounts were utilized in or constitute the proceeds of violations of federal law. It is alleged that Wetterer, the operator of an orphanage in Guatemala, "regularly and systematically molests and sexually abuses the minor boys who reside there." The complaint further alleges that Wetterer finances the operation of the orphanage, known as "Mi Casa," through contributions solicited throughout the United States and that "These solicitations are false and fraudulent insofar as Wetterer represents that 'Mi Casa' provides a healthy and stable environment for its residents, when, in fact, he molests and sexually abuses the boys who reside there." In sum, the complaint supports the forfeiture claim by the crime of money laundering -- namely, engaging in financial transactions involving funds obtained by false mailed solicitations.
III. PRIOR PROCEEDINGS
At the time this action was commenced, an arrest warrant in rem authorizing the seizure of the bank accounts was issued. In response to the seizure, the Asociacion filed a claim to all funds seized. All of the seized accounts are in the name of the Asociacion except the Sterling Bank account number CD 15590, which is in Wetterer's name. The Asociacion contends that it is the owner and entitled to the money in the Wetterer account.
In response to the Asociacion's claims, the Government filed a motion to strike the claims on the ground of lack of standing. The Government also contended that the Asociacion could not file a claim for funds held in Wetterer's name because he was a fugitive and was disentitled to contest any matter in the forfeiture case. The Asociacion countered that it had standing because it was a legal entity separate from Wetterer, and that his acts could not be attributed to the Asociacion. In response, the Government then contended that the Asociacion was Wetterer's alter ego and a shell entity which he completely dominated and controlled in order to perpetuate his fraudulent scheme. Thus, the Government reasoned, since the Asociacion was Wetterer's alter ego, it was also disentitled to file a claim because of Wetterer's fugitive status.
The issue of whether the Asociacion was the alter ego of Wetterer, and thus barred from pursuing this claim was referred to Chief United States Magistrate Judge A. Simon Chrein, for an evidentiary hearing. After a hearing, Judge Chrein held that the Asociacion is the alter ego of Wetterer and recommended that its claim be stricken. In a decision rendered on September 18, 1995, in United States v. Funds Held In The Name Or For The Benefit Of John Hugh Wetterer, 899 F. Supp. 1013 (E.D.N.Y. 1995), this Court essentially affirmed Judge Chrein's conclusions that the Asociacion is Wetterer's alter ego and held "that the Asociacion is disentitled from pursuing its claim in this proceeding, because of the control over the seized bank accounts and the Asociacion's banking transactions exercised by Wetterer, who remains a fugitive. Accordingly, as modified herein the recommendation of Judge Chrein to strike the claim of the Asociacion is adopted, and he Asociacion's claim is stricken."
However, in Degen v. United States, 517 U.S. 820, 116 S. Ct. 1777, 135 L. Ed. 2d 102 (1996), the Supreme Court disapproved of the sanction of disentitlement as an "excessive response." Id. at 829, 116 S. Ct. at 1703. Accordingly, based on Degen, this Court's decision applying the disentitlement decision to strike the Asociacion's claim is vacated. However, the Court's decision that the Asociacion is the alter ego of Wetterer stands. The Court then proceeded to determine the validity of the Asociacion's claims on the merits. The issues in the case are: (1) Did sexual or physical abuse occur at Mi Casa?; (2) If so, as a result of such sexual abuse by Wetterer, did such conduct, coupled with the newsletters soliciting funds, constitute mail fraud?; (3) Did the Government fulfill the requirements under the forfeiture laws so as to permit seizure of the accounts at issue?; (4) Was the Asociacion the "innocent owner" of the funds?; (5) Was there a sufficient nexus between the alleged mail fraud and the subject bank accounts?; and (6) Would forfeiture of the accounts at issue constitute an excessive fine? The claimants deny that any sexual abuse took place; deny that there was probable cause that Wetterer committed mail fraud; and seek to have the seized funds released to them.
IV. THE TRIAL -- FINDINGS OF FACT
This opinion and order includes the Court's findings of fact and conclusions of law as required by Fed. R. Civ. P. 52(a) and 65(d). See Rosen v. Siegel, 106 F.3d 28, 32 (2d Cir. 1997); Colonial Exchange L.P. v. Continental Cas. Co., 923 F.2d 257 (2d Cir. 1991).
Mary Tyre is a resident of and a businesswoman in Miami, Florida. She is familiar with Mi Casa having visited there until November 1988. Tyre sponsored children at Mi Casa. She received a monthly newsletter from Mi Casa with a return envelope addressed to the American Friends of Children. In response to the mailings, at times she sent money and clothes to the AFC and at times directly to Guatemala. Being in the children's clothing business, she sent and delivered clothes free of charge to the boys at Mi Casa.
During this period Tyre developed a mother/son relationship with Manuel Bravo, one of the boys at Mi Casa. With permission of Wetterer, Bravo spent time with Tyre in Miami Beach in 1986 and 1987. During the visit in December 1987, Manuel told her that "Uncle John"
watched the boys when they were in the shower and fondled and caressed them. In subsequent conversations Manuel told her that "Uncle John would invite them into his apartment for a meal and then a shower and then . . . took him to bed . . . [for] fondling, masturbation (Tr. at 24).
Manuel made Tyre promise that she would not tell anyone about what occurred to him, because he didn't want to cause any problem for Uncle John.
In 1987, another resident of Mi Casa, Leonel Piedrasanta, visited and stayed with Tyre. In 1988 Leonel asked her "What I thought of Uncle John's making love with the boys." (Tr. at 26.) Leonel then described "much of the same thing that Manuel has said to me." In November 1988, Tyre called the television program Sixty Minutes, which was preparing a complimentary program on Mi Casa. She asked them not to air their program until they talked to Manuel.
On cross-examination, Tyre testified that she visited Mi Casa in 1985, 1986, 1987 and 1988 and it was her impression that the facilities were providing services to children that needed them. Based on that impression she sent clothing and financial donations to the facility. Also, Tyre was on the Mi Casa mailing list and none of the mailings requested money. However, Tyre sent cash to the facility through her friend Hanna Colombey, a flight attendant. In addition, Tyre testified that in her visits to Mi Casa she never saw any evidence of sexual abuse and it was her impression that "it was a very good place." At Mi Casa, no one ever told her about sexual abuse of the boys. She observed the children in classes and in recreational activities such as soccer, baseball and swimming. However, she never stayed overnight, at a time when Wetterer was the only adult present. During her visits, no one ever approached her to complain of anything at Mi Casa. Also, even after Manuel made these allegations, she allowed him to return to Mi Casa. The Court notes that Tyre had no personal knowledge of any sexual abuse and relied entirely on statements to her by Manuel and Leonel.
United States Postal Inspector John McDermott was a child pornography specialist. In 1989, he commenced an investigation of alleged child abuse at Mi Casa by Wetterer, after the Sixty Minutes program in February, 1988. Wetterer sent newsletters to contributors almost monthly between 1985 and the end of 1988. The newsletters were on the letterhead of "American Friends of Children, Inc." or "Mi Casa American Friends of Children, Inc.", both containing a Guatemalan address. The newsletters enclosed a small payment envelope. Also introduced in evidence were a series of checks drawn on the account of American Friends of Children, Inc. to the order of John Wetterer and deposited by Wetterer in a Bank of America account in Miami, Florida in the name of the Asociacion. Wetterer received approximately $ 520,000 from the American Friends of Children from March 1986 through November 1988. The Court finds that Wetterer solicited funds by newsletters sent to patrons in the United States. The funds were received by the American Friends of Children, Inc. and then sent to Wetterer for his use at Mi Casa. Apparently, Wetterer was the only signatory on the Asociacion checking accounts.
McDermott testified that the American Friends of Children, Inc. was a loose knit organization of volunteers on Long Island that attempted to help Wetterer in the operation of Mi Casa. Wetterer was on the Board of American Friends of Children and Daniel Mackay, now deceased, was the treasurer.
After the public allegations of sexual abuse at Mi Casa, Wetterer continued to mail newsletters between 1989 and 1991. In the newsletters these allegations were discussed and refuted by Wetterer. People continued to contribute to Mi Casa notwithstanding the allegations of sexual abuse. These newsletters contained preprinted return envelopes addressed not to American Friends of Children but to a post office box in Spring, Texas.
McDermott made out a criminal complaint against Wetterer and, on September 14, 1990, a warrant was issued for his arrest. He called Wetterer in Guatemala on the telephone and asked him to surrender in the Eastern District of New York and was told "He was much too busy caring for 500 boys and he couldn't possibly leave." (Tr. at 89). On February 12, 1991, Wetterer was indicted and charged with mail fraud and the interstate transportation of funds stolen by fraud. To McDermott's knowledge, after the issuance of the criminal complaint, Wetterer has never personally appeared in the Eastern District of New York.
McDermott testified that the basis for the mail fraud is that Wetterer misrepresented Mi Casa as a safe and healthy environment at the time that sexual abuse was being perpetrated by him at Mi Casa. In addition, and not alleged in the complaint, Wetterer is presently charged with beating the children, which, according to McDermott, also would belie his representations of a healthy and safe environment at Mi Casa.
McDermott made no attempt to interview any boys in Guatemala. In the United States, he interviewed six former residents and two adult volunteers of Mi Casa, namely Mary Tyre and Hannah Colombey, and some contributors to Mi Casa. He also interviewed two medical professionals, Dr. Miranda and Dr. Samek, who told him they thought Wetterer was sexually abusing the boys under his care. McDermott also spoke to six boys; namely, Jose Luis Lutin, Leonel Piedrasanta, Manuel Bravo, Joel Salas, Jerry Gomez and "Robert" Morgan. Piedrasanta and Bravo apparently are still in the United States, having applied for asylum. McDermott did not speak to any teachers in Mi Casa, who are daytime employees, nor did he visit Mi Casa.
As to the newsletters which are a basis for the mail fraud charges, they came from Wetterer and were received in the United States in envelopes containing Guatemalan stamps. The return envelopes were addressed to a post office box in Massapequa. Mackay would gather the envelopes and deposit the checks in a bank account of the American Friends of Children and then the funds were forwarded to Wetterer. Wetterer was a signatory on the American Friends of Children account. As stated above, there was a Miami bank account bearing number 05616. McDermott believes the name on the account was Mi Casa and Wetterer was a signatory on the account. According to McDermott, substantial sums of money in the Miami account was paid to and for the benefit of Wetterer's sons and to Jeffrey Waller, Wetterer's attorney.
Questioned about the alleged misrepresentations in the newsletters, McDermott pointed to the following language:
May 1985 Newsletter "They were also very happy."
July 1985 Newsletter "Everything fine here. Same little boy
August 1985 Newsletter "So much has changed over three years; so many
children have been helped."
May 1987 Newsletter "Boys all OK."
October 1987 Newsletter "All fine here."
June 12, 1988 Newsletter "Everything is fine here. . . So many people have
this romantic picture of good old Tio Juan going
from bed to bed tucking in each young fellow."
August 25, 1988 Newsletter "Well, in closing a thank you for helping me
during these past twelve years -- a thank you for
helping me to help so many young boys have a
December 1988 Newsletter "Been telling you to watch Sixty Minutes a number
of times. Now sorry that I did -- seems that, if
the piece shows, it will be negative and very
damaging. A false accusation is no less hurtful
and I guess knowing that we had no 'skeletons in
May 1989 Newsletter "Pleased to say that each organization has arrived
at the exact same conclusion and found our home to
be a safe, sane and stable place for the boys with
absolutely no evidence, whatsoever, of child
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