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U.S. v. ALL FUNDS ON DEPOSIT IN DIME SAV. BANK

United States District Court, Eastern District of New York


February 19, 2003

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ALL FUNDS ON DEPOSIT IN DIME SAVINGS BANK OF WILLIAMSBURG ACCOUNT NO. 58-400738-1 IN THE NAME OF ISHAR ABDI AND BARBARA ABDI, ET AL., DEFENDANTS.

The opinion of the court was delivered by: Robert Levy, Magistrate Judge.

MEMORANDUM AND ORDER

This matter appears before me on consent of the parties, pursuant to 28 U.S.C. § 636. Presently pending are claimant Barbara Abdi's motions for judgment on the pleadings and for leave to amend her answer to assert a statute of limitations defense, and plaintiff's cross-motion for leave to amend the complaint. For the reasons set forth below, claimant's motion for judgment on the pleadings is denied, the government's cross-motion for leave to amend the complaint is granted, and claimant's motion to amend the answer to assert a statute of limitations defense is granted.

PROCEDURAL BACKGROUND

The United States commenced this civil forfeiture action on April 2, 2001. According to the United States, the defendant properties are subject to forfeiture because they constitute the proceeds of a health care fraud and mail fraud scheme perpetrated by Ishar Abdi, M.D. ("Dr. Abdi"), the husband of claimant Barbara Abdi ("claimant" or "Barbara Abdi"), and because they were involved in or are traceable to monetary transactions made in violation of 18 U.S.C. § 1957. On April 23, 2001, Dr. Abdi pleaded guilty to health care fraud, in violation of 18 U.S.C. § 1347.*fn1 As part of his plea, he agreed to forfeit $1.49 million, including his interest in all of the defendant properties. By order dated May 5, 2001, the court ordered his interest in these properties to be forfeited (see Declaration of Michael J. Goldberger, Esq., dated Nov. 12, 2002 ("Goldberger Decl."), Exs. 1, 4), and it ordered Dr. Abdi to pay $710,000 in settlement of his civil liabilities under the False Claims Act. (Id., Ex. 5.)

The United States alleges that the fraud proceeds were all initially deposited into the defendant Dime Savings Bank of Williamsburg Account (the "Dime Savings Bank Account"), a joint account with title held in the names of both Ishar Abdi and Barbara Abdi, and that both Ishar and Barbara Abdi made transfers from that account to the other defendant properties. According to the complaint, approximately $430,000 was transferred from the Dime Savings Bank Account to the defendant investment account at Charles Schwab & Co. (the "Schwab Account"), held in the names of Ishar and Barbara Abdi. In addition, from January 1995 to April 2000, the Abdis allegedly paid the mortgage on their home at 1 Trusdale Drive in Old Westbury, New York (the "Old Westbury House"), approximately $10,385 per month, from the Dime Savings Bank Account. (Verified Complaint in Rem, dated March 30, 2002 ("Compl."), ¶ 46.) The Abdis also paid their mortgage on a condominium located at 207-23 Darren Drive in Bayside, New York (the "Bayside Condominium"), and purchased two cooperative apartments at 59 Pineapple Street in Brooklyn, New York (the "Pineapple Street Apartments") using the funds in the Dime Savings Bank Account. (Id. ¶¶ 47, 49.) The cooperative shares associated with one of those apartments, Apartment 5K, were purchased in the names of Ishar and Barbara Abdi for $110,000. (Id. ¶ 49.) The cooperative shares associated with the other apartment, Apartment 4J, were purchased solely in the name of Ishar Abdi for $70,000. (Id.) Finally, on or about September 26, 2000, the Abdis took a new mortgage on the Old Westbury House in the approximate amount of $425,000, the proceeds of which they deposited into the Dime Savings Bank Account. (Id. ¶ 48.) The defendant properties in rem therefore consist of: (a) the funds on deposit in the Dime Savings Bank Account, (b) the Schwab Account, (c) the proceeds of the sale of the Old Westbury House,*fn2 (d) the two cooperative apartments at 59 Pineapple Street, and (e) the Bayside Condominium.*fn3

The ten forfeiture claims in the complaint fall into two categories. The first category constitutes claims seeking forfeiture of properties involved in money laundering transactions (i.e., monetary transactions in property derived from specified unlawful activity) in violation of 18 U.S.C. § 1957. The second category constitutes claims seeking forfeiture of properties that constitute or are derived from proceeds traceable to a violation of specified unlawful activity. (See Compl.)

In her Verified Claim, Barbara Abdi claims an ownership interest in all of the defendant properties, and she asserts among her affirmative defenses that she did not have knowledge of her husband's criminal conduct. As to the funds in the Dime Savings Bank Account and in the Schwab Account, she claims to be a "joint tenant with right of survivorship or tenant in common." (Verified Claim, dated June 12, 200, ¶¶ 1, 2.)*fn4 She also claims to be a "tenant by the entirety" with respect to the Old Westbury House and the Bayside Condominium. (Id. ¶¶ 3, 4.) Finally, as to the Pineapple Street Apartments, she claims to be the "beneficiary of a constructive trust," and/or that the property was purchased and the interest acquired "by payment of marital property." (Id. ¶¶ 5, 6.)

DISCUSSION

A. Claimant's Motion for Judgment on the Pleadings

1. Claims brought under CAFRA

Claimant argues that the first, third, fifth, seventh, and ninth claims, which seek forfeiture of proceeds traceable to a federal health care or mail fraud offense under 18 U.S.C. § 981, fail to state claims upon which relief can be granted. (Memorandum of Law in Support of Claimant's Motion for Judgment on the Pleadings, dated Aug. 20, 2002 ("Claimant's Mem."), at 5.) These claims rely in material respects on the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), which became effective on August 23, 2000 and amended 18 U.S.C. § 981(a)(1)(C) to provide for civil forfeiture of proceeds traceable to any offense constituting "specified fraudulent activity," which includes federal health care fraud and mail fraud. See 18 U.S.C. § 1956(c)(7). According to claimant, CAFRA cannot apply to the defendant properties because the acts that constituted Dr. Abdi's fraud offenses occurred prior to the effective date of CAFRA, which, claimant argues, cannot apply retroactively. (Claimant's Mem. at 5-12.)

Claimant's argument relies in large part on Landgraf v. USI Film Prods., 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), in which the Supreme Court set forth standards for determining whether a newly enacted statute may be applied retroactively to cases pending at the time of enactment. The Court explained that the first step of the inquiry is to determine whether the statute itself contains a clear expression of Congressional intent as to its temporal reach. Id. at 280, 114 S.Ct. 1483. If the statute does not contain an "express command," then the court

must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed.

Id. However, if Congress has indicated its intent, then there is no need to resort to these judicial default rules. Id.

Pursuant to 8 U.S.C. § 1324, the amendments contained in CAFRA "shall apply to any forfeiture proceeding commenced on or after the date that is 120 days after the date of enactment of this Act." (emphasis added.) Few courts have had the opportunity to pass on the retroactivity of CAFRA's provisions, but those that have done so appear to have looked solely to when the civil forfeiture complaint was filed vis-a-vis the effective date of the Act, and not to when the fraudulent acts underlying the forfeiture action took place. For example, in United States v. Six Negotiable Checks, 207 F. Supp.2d 677 (E.D.Mich. 2002), the court held that CAFRA's heightened burden of proof*fn5 applied to a case that the government had commenced more than eight months after CAFRA's effective date. Id. at 682. Although the underlying acts giving rise to the forfeiture action had taken place in 1998, the court made no reference to that fact in holding that the CAFRA standards were controlling. Id. The court simply noted that, "by its express terms," CAFRA applies to any forfeiture proceeding commenced on or after August 23, 2000. Id.

Other courts, confronting the situation where the forfeiture action was already pending prior to the effective date of CAFRA, have held that Congressional intent concerning CAFRA's applicability is clear and unambiguous, and that there is therefore no need to conduct the analysis set forth in Landgraf. See, e.g., United States v. $80,180.00 in U.S. Currency, 303 F.3d 1182, 1185 (9th Cir. 2002) ("Congress manifested a clear intent to apply CAFRA[] . . . only to judicial forfeiture proceedings in which the government's complaint was filed on or after August 23, 2000. . . ." and "did not intend to apply the new law to cases filed before but pending on the effective date"); United States v. Portrait of Wally, No. 99 Civ. 9940, 2002 WL 553532, at *14 (S.D.N.Y. Apr.12, 2002) ("Because Congress has explicitly prescribed the statute's reach," use of the Landgraf default rule was not warranted and pre-CAFRA law applied to forfeiture case commenced in 1999).*fn6

The government commenced the instant forfeiture action on April 2, 2001, more than six months after the effective date of CAFRA. This court agrees with the holdings in the above cases that Congressional intent is clear and express: CAFRA, by its terms, "shall" apply to all forfeiture cases commenced on or after August 23, 2000. it therefore applies here. Had Congress wanted to exclude from CAFRA's reach cases that are commenced after the effective date of the Act but where the underlying fraudulent conduct occurred prior to the effective date of the Act, it could have done so.*fn7 Since it did not, and since there is nothing ambiguous in the statute's language concerning its reach or applicability, there is no need to conduct the Landgraf retroactivity analysis.

Contrary to claimant's argument, Immigration and Naturalization Serv. v. St. Cyr, 533 U.S. 289, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001), does not counsel a different result. In St. Cyr, the Supreme Court held that the "mere promulgation of an effective date for a statute" is ambiguous and does not provide sufficient evidence that Congress considered the "potential unfairness" of retroactive application. Id. at 317, 121 S.Ct. 2271. The Court found that a "statement that a statute will become effective on a certain date does not even arguably suggest that it has any application to conduct that occurred at an earlier date." Id. However, CAFRA is distinguishable from the statute at issue in St. Cyr, since its clear language does much more than merely announce an effective date.*fn8 Indeed, the statute could not be more precise: it "shall apply to any forfeiture proceeding commenced on or after the date that is 120 days after the date of enactment of this Act."*fn9 Since Congress has "expressly prescribed the statute's proper reach," there is "no need to resort to judicial default rules" and the court need not move on to step two of the Landgraf analysis. See Landgraf, 511 U.S. at 280, 114 S.Ct. 1483. Accordingly, claimant's motion for judgment on the pleadings with respect to the first, third, fifth, seventh, and ninth claims is denied. For this reason, as well, the court must deny claimant's request to have the preCAFRA version of the innocent owner defense apply in this case.*fn10

2. Claims brought under 18 U.S.C. § 1957

The remaining claims in the complaint seek forfeiture pursuant to 18 U.S.C. § 981(a)(1)(A) of properties involved in money laundering in violation of 18 U.S.C. § 1957. Claimant puts forth essentially three arguments for why she believes these claims should be dismissed. First, claimant asserts that they fail to allege an essential element of a § 1957 offense; namely, a monetary transaction involving the proceeds of fraudulent activity. (See Claimant's Mem. at 14.) Second, she argues that the complaint fails to allege transactions involving over $10,000. (Id. at 16-18.) Finally, she argues that these claims are, in large part, barred by the one-year statute of limitations for civil forfeiture actions involving fungible property. (Id. at 15.) I will address these arguments in turn.

a. What Constitutes a "Monetary Transaction" Involving "Proceeds" of Fraudulent Activity?

Claimant contends that "[n]one of the deposits that [Dr.] Abdi made to the Dime Account of the Medicare or Medicaid checks that he had received as a result of his fraud can properly be the basis of a forfeiture claim" because funds cannot be deemed "proceeds" used in a monetary transaction until the check has been deposited and has cleared. (Claimant's Mem. at 7) (emphasis added.) In other words, in order for funds to be considered proceeds of a crime that are subject to forfeiture, the defendant had to have obtained "possession or control of the funds that were the object of the scheme to defraud before he engaged in the monetary transaction that is allegedly violative of the statute." (Id. at 8.) Since the checks did not clear until after they were deposited, claimant argues, Dr. Abdi did not obtain possession or control over the funds until after the deposits, which means that none of the deposits themselves can "serve as a predicate act for a money laundering offense under § 1957." (Id. at 9.)

18 U.S.C. § 1957 prohibits "knowingly engag[ing] or attempt[ing] to engage in a monetary transaction in criminally derived property," which is defined as "any property constituting, or derived from, proceeds obtained from a criminal offense." 18 U.S.C. § 1957(a), (f)(2). Claimant is therefore correct that money laundering "must be a crime distinct from the crime by which the money is obtained," which in turn means that "[t]he money laundering statute . . . is a prohibition of processing the fruits of a crime or of a completed phase of an ongoing offense." United States v. Abuhouran, No. CR. A. 95-560-04, 2001 WL 849716, at *1-*2 (E.D.Pa. July 12, 2001) (citing United States v. Conley, 37 F.3d 970, 980 (3d Cir. 1994)). See also United States v. McCarthy, 271 F.3d 387, 395 (2d Cir. 2001) ("Our case law consistently distinguishes between the crime that produces proceeds and the subsequent crime of laundering those proceeds, even though the transactions may flow together").

The question here is whether depositing a check received as a result of criminal activity constitutes "a monetary transaction in criminally derived property" under § 1957. Numerous courts have answered this question in the affirmative. See United States. v. Lomow, 266 F.3d 1013, 1018 (9th Cir. 2001) ("depositing the check . . . constituted a separate transaction from the fraud that generated the funds"); United States v. Cefaratti, 221 F.3d 502, 510-11 (3d Cir. 2000) (deposit of fraudulently obtained student loan checks is money laundering because the checks became criminally derived property once endorsed) (cited with approval in McCarthy, 271 F.3d at 395); United States v. Graffia, No. 93 CR 842, 1995 WL 374127, at *3 (N.D.Ill. June 21, 1995) ("The term `monetary transaction' includes the deposit of a check").

The cases claimant cites in support of her position, all of which involved criminal charges of bank fraud, are inapposite. United States v. Piervinanzi, 23 F.3d 670 (2d Cir. 1994), stands for the simple proposition that before a person can launder money he or she must first have obtained it illegally.*fn11 The court in Piervinanzi did not state that one only "obtains" illegal proceeds of a fraud when the check clears, or that depositing a check received as a result of fraudulent activity cannot constitute a "monetary transaction in criminally derived property."

Claimant also cites United States v. Christo, 129 F.3d 578, 580 (11th Cir. 1997). The government in that case contended that the act of depositing checks in a check-kiting scheme constituted money laundering. The defendant countered that, because the predicate offense of bank fraud required execution (i.e., the movement of funds from the financial institution), the money allegedly laundered did not constitute the proceeds of crime until after the deposit. In other words, the defendant claimed that the last act of bank fraud could not have constituted the money laundering transaction, since the two offenses needed to be separate. The court agreed, stating that "the underlying criminal activity must be complete before money laundering can occur." Id. at 580. The Eleventh Circuit explained that the money laundering statutes punish transactions in proceeds, not the transactions that create those proceeds. Because bank fraud does not generate its proceeds until after execution, i.e., until the money is in the account of the perpetrator, the defendant in Christo could not have engaged in the separate act of money laundering. Christo is entirely distinguishable from the instant case, in which Dr. Abdi's fraudulent acts were completed before he engaged in the separate act of depositing the proceeds derived from those acts. Depositing the checks was not part and parcel of the predicate fraudulent conduct.

United States v. Npcoli, 54 F.3d 63 (2d Cir. 1995), and United States v. Seward, 272 F.3d 831 (7th Cir. 2001), are distinguishable for the same reason. Both involved acts of bank or wire fraud, in which the deposit or transfer at issue constituted the original acquisition of the monies by fraud, and not separate monetary transactions.*fn12

Finally, claimant contends that the United States Attorney's Office "recently took a directly contrary position before the Second Circuit Court of Appeals" in United States v. All Funds, 99 CV 1453, 2001 WL 1150217 (E.D.N.Y. Sept.21, 2001) (appeal pending). All Funds was a forfeiture case involving a fraudulent scheme in which Medicare checks were deposited into a bank account; the commingled funds from the bank account were then transferred to a pension fund, which was later terminated. The pension plan's assets were then distributed to the claimants' individual IRA accounts, which were the subject of the forfeiture action. Id. at *1. The claimants moved to dismiss the case on statute of limitations grounds, and the district court found that the action was timebarred by the one-year statute of limitations in 18 U.S.C. § 984(a)(1),*fn13 which applies to property that is "fungible." Id., 2001 WL 1150217, at *2. On appeal, the government argued for the application of the five-year statute of limitations under 18 U.S.C. § 981(d),*fn14 which, according to the district court, only applies if the proceeds of money laundering constitute "specific" and "identifiable" property. Id. In its reply brief on appeal, the government asserted that when the claimants transferred the monies from the bank account to the pension fund, knowing that some of those monies represented the proceeds of "specified unlawful activity," they engaged in money laundering transactions in violation of 18 U.S.C. § 1956. (See Reply Brief for Plaintiff-Appellant in All Funds, annexed to Claimant's Reply Mem. as Appendix A.) The government argued that it was those money laundering transactions, and not the original deposits into the bank account, that were at issue in the case. Nowhere did the government argue that the original deposits did not constitute money laundering transactions.*fn15

Regardless, even if the United States Attorney's Office did take a contrary position in another case, I find its argument in this case persuasive. I therefore find that the complaint properly alleges monetary transactions in criminally derived property with respect to the Dime Savings Bank Account.

b. Transfers Exceeding $10,000/Motion to Amend Complaint

Next, claimant argues that the forfeiture complaint fails to allege with particularity that any transfer of criminally derived property from the Dime Savings Bank Account was for more than $10,000. Claimant is correct that 18 U.S.C. § 1957 makes it a federal criminal offense for one to "knowingly engage[] or attempt[] 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." (emphasis added.) Thus, the government must plead, as an essential element, that each monetary transaction alleged in the complaint involved more than $10,000. Rule E(2)(a) of the Supplemental Rules for Certain Admiralty and Maritime Claims requires that the complaint describe "the circumstances from which the claim arises" so as to enable a claimant, "without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading." To satisfy Rule E(2)(a), the government must "assert specific facts supporting an inference that the property is in fact subject to forfeiture" under the forfeiture laws. United States v. Approximately $25,829,681.80 in Funds, plus Interest, in Court Registry Investment System, No. 98 Civ. 2682, 1999 WL 1080370, at *7 (S.D.N.Y. Nov. 30, 1999) (citing United States v. All Right, Title & Interest in Real Property & Appurtenances Known as 288-290 N. St., Middletown, New York, 743 F. Supp. 1068, 1074 (S.D.N.Y. 1990); United States v. All Right, Title & Interest in Real Property & a Bldg. Known as 16 Clinton St., New York, New York, 730 F. Supp. 1265, 1267 (S.D.N.Y. 1990)). The requirements of particularity under this rule are "`more stringent than the general pleading requirements . . . [,] an implicit accommodation to the drastic nature of the civil forfeiture remedy.'" United States v. $15,270,885.69, No. 99 Civ. 10255, 2000 WL 1234593, at *2-*3 (S.D.N.Y. Aug.31, 2000) (quoting United States v. Daccarett, 6 F.3d 37, 54 (2d Cir. 1993)).

The government does not dispute this. Rather, it points out that at least some of the transactions in the complaint are alleged to constitute monetary transactions in criminally derived property that is of a value greater than $10,000. For example, the complaint alleges that in September 2000, when the Abdis used the equity in the Old Westbury House to obtain another mortgage of approximately $425,000, the deposit of those loan proceeds constituted a monetary transaction of a value greater than $10,000. (See Compl. ¶ 48.)*fn16 In addition, the complaint alleges that the Abdis deposited "at least $430,000 in proceeds of his health care fraud activities" into the Schwab Account. (See Compl. ¶¶ 45, 55.) According to the government, that transfer also constitutes a monetary transaction in criminally derived property of a value greater than $10,000. With respect to the remaining transactions, the government seeks leave to amend and supplement the complaint to "clarify the allegations based upon 18 U.S.C. § 1957" and plead specifically that each claim based on § 1957 concerns a transaction in excess of $10,000. The government also seeks leave to allege claims based on money laundering under 18 U.S.C. § 1956 and to supplement the complaint with some facts that occurred after the original complaint was filed. (See Proposed Amended Complaint; Pl.'s Mem. of Law in Opposition, dated Oct. 7, 2002, at 25.)

Pursuant to Fed.R.Civ.P. 15, leave to amend "shall be freely given" in the absence of "any apparent or declared reason — such as undue delay, bad faith or dilatory motive . . ., repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [or] futility of amendment." Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). An application for leave to file an amended or supplemental pleading "is addressed to the discretion of the court." Bornholdt v. Brady, 869 F.2d 57, 68 (2d Cir. 1989).

Although claimant implicitly concedes that the proposed Amended Complaint addresses her objection and properly alleges that each claim based on § 1957 concerns a transaction in excess of $10,000, claimant asserts a number of other objections to the government's motion to amend. First, claimant argues that the allegations in the proposed Amended Complaint are not pled with sufficient particularity to properly allege that the assets the government seeks to forfeit are directly traceable to fraudulent activity, and therefore within the applicable statute of limitations. (See Tr. at 38-39, 55-62.)*fn17 Because it is undisputed that the Dime Savings Bank Account contained both legitimate and criminally derived funds over time, claimant argues, the government is required to allege facts showing that each transfer can be traced to specific deposits of criminally derived monies. (Id. at 55) ("If your Honor looks at that proposed draft amended complaint, there are no — I repeat, zero facts to show how the government is going to trace from the criminal proceeds, from the deposits to the withdrawals.")

However, the issue before the court is pleading, not proof at trial. Thus, the court need not pass on the government's ultimate burden of proof regarding traceability. The only question is whether the proposed Amended Complaint describes sufficiently "the circumstances from which the claim[s] arise[ ]" so as to enable claimant, "without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading." (Rule E(2)(a) of the Supplemental Rules for Certain Admiralty and Maritime Claims.)*fn18 As explained, to satisfy this rule, the government need only "assert specific facts supporting an inference that the property is in fact subject to forfeiture. . . ." United States v. Approximately $25,829,681.80 in Funds, plus Interest, in Court Registry Investment System, No. 98 Civ. 2682, 1999 WL 1080370, at *7 (emphasis added).*fn19 To be sure, the government "may not seize and continue to hold property upon conclusory allegations that the defendant property is forfeitable." United States v. Certain Accounts, Together With all Monies on Deposit Therein, 795 F. Supp. 391, 394 (S.D.Fla. 1992) (citing United States v. $38,000.00 in United States Currency, 816 F.2d 1538, 1548 (11th Cir. 1987)). See also United States v. United States Currency, in the Amount of $150,660.00 ("$150,660.00"), 980 F.2d 1200, 1204 (8th Cir. 1992) ("Under Rule E(2)(a) the government cannot merely notice plead, as a claimant must be able to respond to the complaint with more than a general denial") (citing United States v. $39,000 in Canadian Currency, 801 F.2d 1210, 1216 (10th Cir. 1986)). However, there is no requirement that all of the facts and evidence at the government's disposal be pled in the complaint; the government must simply plead enough specific facts for the claimant to understand the government's theory, file a responsive pleading that contains more than a general denial, and undertake her own investigation. See $150,660.00, 980 F.2d at 1204-05 ("Rule E(2)(a) does not require the government to meet, at the pleading stage, its ultimate trial burden").*fn20

Having reviewed the proposed Amended Complaint thoroughly, I find that the government has alleged sufficient facts to meet the particularity requirement of Rule E(2)(a). The government has offered specific information about the transactions at issue such that claimant is "adequately apprised of the factual circumstances underlying the forfeiture action." United States v. Approximately $25,829,681.80 in Funds, plus Interest, in Court Registry Investment System, No. 98 Civ. 2682, 1999 WL 1080370, at *7 (S.D.N.Y. Nov. 30, 1999) (citing United States v. Premises & Property at 4492 S. Livonia Rd., Livonia, New York, 889 F.2d 1258, 1266 (2d Cir. 1989)). The proposed Amended Complaint tracks the proceeds of the health care fraud from the Dime Savings Bank Account to the other defendant properties. This information provides the necessary details to allow claimant to frame a response and undertake an investigation. See United States v. All Monies in Account #42032964 at Meridian Bank, Reading, PA., No. 92-1996, 1992 WL 301257, at *2 (E.D.Pa. Oct.14, 1992) (civil forfeiture complaint that traced the proceeds of bank fraud from a trading account to several intermediate bank accounts to real estate that was sold, the proceeds having been deposited in the defendant bank account, fulfilled the requirements of Rule E(2)(a)).*fn21

Claimant also objects to the addition of money laundering claims under 18 U.S.C. § 1956. She asserts that "ordinary purchases and financial transactions made with ill-gotten gains do not violate § 1956," and accordingly, that the government must allege more than the mere spending of criminal proceeds to satisfy § 1956. (Cl.'s Reply Mem. at 22.) 18 U.S.C. § 1956 is the money laundering statute. To prove its case under § 1956, the government must show four elements: (1) an actual or attempted financial transaction, (2) involving the proceeds of specified unlawful activity; (3) knowledge that the transaction involves the proceeds of some unlawful activity; and (4) either (a) an intent to promote the carrying on of specified unlawful activity, or (b) knowledge that the transaction is designed to promote the underlying specified unlawful activity or "to conceal or disguise the nature [or] the source . . . of the proceeds of specified unlawful activity." United States v. Morelli, 169 F.3d 798, 804 (3d Cir. 1999) (citing 18 U.S.C. § 1956(a)(1)). "None of these requirements is very rigorous." United States v. Howard, No. CRIM. A. CR 99-120, 1999 WL 504561, at *1 (E.D.Pa. July 15, 1999).

Again, this is an issue of pleading, not proof. Here, the government alleges that, by commingling illegally derived proceeds with legitimate funds with the intent of concealing or disguising the source of the proceeds, Dr. Abdi engaged in money laundering transactions. Such allegations state a claim under § 1956. See United States v. McGauley, 279 F.3d 62, 76 (1st Cir. 2002) (jury was properly instructed that the commingling of tainted funds with legitimate funds is enough to expose the legitimate funds to forfeiture, if the commingling was done "for the purpose of concealing the nature or source of the tainted funds"); United States v. Bornfield, 145 F.3d 1123, 1135 (10th Cir. 1998) ("forfeiture of legitimate and illegitimate funds commingled in an account is proper as long as the government demonstrates that the defendant pooled the funds to facilitate, i.e., disguise the nature and source of, his scheme"); United States v. Iacaboni, 221 F. Supp.2d 104, 114-15 (D.Ma. 2002) ("a person may commit money laundering merely by depositing the proceeds of an unlawful activity into a bank account in his own name, so long as he does so in order to `to conceal or disguise' the illegal nature or source of those funds"); United States v. Certain Funds on Deposit In Account No. 01-0-71417, Located at the Bank of New York, 769 F. Supp. 80, 85 (E.D.N.Y. 1991) ("It is precisely the commingling of tainted funds with legitimate money that facilitates the laundering and enables it to continue"). See also United States v. All Funds Presently on Deposit or Attempted to be Deposited in any Accounts Maintained at American Exp. Bank, 832 F. Supp. 542, 560-61 (E.D.N.Y. 1991) ("a cause of action to forfeit property . . . under 18 U.S.C. § 1956 accrues when the proceeds of that violation are deposited into a volatile account, since the deposits may then be deemed as designed `to conceal or disguise the nature, the location, or the control of the proceeds'").

Claimant correctly states that a money laundering conviction under § 1956 "requires more than proof of the spending of the ill-gotten gains." United States v. Stephenson, 183 F.3d 110, (2d Cir.), cert. denied, 528 U.S. 1013, 120 S.Ct. 517, 145 L.Ed.2d 400 (1999). See also United States v. Dobbs, 63 F.3d 391, 398 (5th Cir. 1995) ("where the use of the money was not disguised and the purchases were for family expenses and business expenses . . ., there is . . . insufficient evidence to support the money laundering conviction"); United States v. Rockelman, 49 F.3d 418, 422 (8th Cir. 1995) (Section 1956 should not be interpreted to criminalize ordinary spending of drug sale proceeds); United States v. Garcia-Emanuel, 14 F.3d 1469, 1476 (10th Cir. 1994) (Section 1956(a)(1) "is a concealment statute — not a spending statute"). However, in its complaint, the government alleges more than mere spending of money; it alleges an intent to conceal the source, ownership or control of the funds put into the Dime Savings Bank Account and the defendant properties. Whether or not the government ultimately will prevail on this claim is not presently before the court, but the facts alleged are sufficient to state a cause of action under § 1956. See, e.g., Howard, 1999 WL 504561, at *3 (transfer of funds to a personal account owned by claimant and her mother demonstrated an intent to conceal the source, nature, location, ownership, and control of proceeds derived from bank and wire fraud).

Finally, claimant argues that the court should award her attorney's fees and conduct a probable cause hearing if it grants the government's motion to amend. (See Reply Memorandum of Law in Support of Claimant's Motion for Judgment on the Pleadings, dated Oct. 28, 2002, at 16, 25-26.) On the issue of attorney's fees, it is true that courts have discretion to award fees in the unusual situation where an opposing party will suffer prejudice as a result of an amendment. See Mohideen v. American Airlines, Inc., No. 99 Civ. 0016, 1999 WL 714089, at *3 (S.D.N.Y. 1999) ("a court granting a party leave to amend may impose reasonable conditions which `take into account any prejudice that the opposing party will suffer as a result of the amendment,' . . . the most common of which is the imposition of costs") (citations omitted); Hayden v. Feldman, 159 F.R.D. 452, 455 (S.D.N.Y. 1995) (awarding fees to defendant who "would not have been put to the expense of moving to dismiss the faulty Third Amended Complaint had plaintiffs filed a proper complaint at the outset" where plaintiffs "conceded that seventy-five percent of the work done by [defendant's] attorneys [was] `unnecessary'" and was caused by "plaintiffs' decision to proceed in [an] inefficient manner"). Such fees and costs are generally awarded, however, only after the defendant has been compelled to file multiple motions to dismiss. See Health & Community Living, Inc. v. Goldis Fin. Group, Inc., No. 96 CV 0459, 1998 WL 117928, at *6 (E.D.N.Y. Mar.13, 1998) (denying motion for costs where defendant "was not required to file a second motion to dismiss"). Unlike plaintiffs who file numerous amended complaints that fail to address problems raised in motions to dismiss, the government here seeks to amend its complaint for the first time. I find no prejudice warranting an award of fees. Claimant's request for attorney's fees is, therefore, denied.

Claimant also cites Krimstock v. Kelly, 306 F.3d 40 (2d Cir. 2002), for the proposition that a prompt probable cause hearing is "constitutionally required" in this case. (Cl.'s Reply Mem. at 27.) However, that case does not support claimant's argument. The plaintiffs in Krimstock brought an action under 42 U.S.C. § 1983 challenging New York City Code § 14-140, which authorizes the warrantless seizure of vehicles used to commit a crime, including the misdemeanor of driving while intoxicated. The Second Circuit held that claimants whose vehicles are seized without a warrant are entitled to a prompt probable cause hearing under the fourth and fourteenth amendments. Id. at 50-53. However, the court explicitly distinguished the statute at issue in that case from other forfeiture statutes, including the federal forfeiture statutes, noting that other statutes contain special provisions not present in New York City Code § 14-140, such as innocent owner provisions and provisions allowing for the release of property where the claimant can show that continued possession by the government would pose a "substantial hardship." Id. at 55-56, 58 n. 19, 61, 62 n. 23. Indeed, as the government points out, the court here made a determination of probable cause when it issued a warrant for the funds in the brokerage accounts, and — unlike the vehicles in Krimstock — the real properties at issue have not been physically seized. Since the civil forfeiture statutes at issue in this case differ significantly from the statute before the court in Krimstock, I find Krimstock inapplicable. No probable cause hearing is required or necessary at this point.

B. Motion to Amend the Answer

Although the government initially opposed claimant's motion to amend her answer to assert a statute of limitations defense, it now withdraws that objection, pointing out that its objection would be moot if it were granted leave to amend its complaint, since claimant "would have an opportunity to replead her answer as a matter of right." (Pl.'s Reply Memorandum of Law in Further Support of its Cross-Motion to Amend the Complaint, dated Nov. 12, 2002, at 14 n. 4.) Because the court is granting the government's motion to amend, claimant will have the opportunity to serve and file an answer to the amended complaint and to assert any defenses she deems appropriate. it is therefore unnecessary for the court to address the merits of the statute of limitations defense at this time.

CONCLUSION

For the reasons stated above, claimant's motion to dismiss the complaint is denied. Plaintiff's cross-motion for leave to amend the complaint is granted, and claimant may replead her answer accordingly.

SO ORDERED.


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