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United States v. United States Currency in the Amount of Five Hundred Ninety-Eight Thousand Eight Hundred Twenty Six Dollars

September 13, 2007

UNITED STATES OF AMERICA, PLAINTIFF,
v.
UNITED STATES CURRENCY IN THE AMOUNT OF FIVE HUNDRED NINETY-EIGHT THOUSAND EIGHT HUNDRED TWENTY SIX DOLLARS ($598,826.00) MORE OR LESS, AND ALL PROCEEDS TRACEABLE THERETO, DEFENDANT.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge

MEMORANDUM AND ORDER

Plaintiff United States of America ("government" or "plaintiff"), brought this in rem proceeding against funds totaling five hundred ninety eight thousand eight hundred twenty-six dollars ($598,826) ("defendant funds"). Edison Cardona ("claimant" or "Cardona") seeks return of a portion of defendant funds in the amount of five hundred eighteen thousand eight hundred and twenty-six dollars ($518,826). In this motion, the government requests that the court strike Cardona's claim pursuant to Fed. R. Civ. P. 12(f) because Cardona does not have standing to assert the claim, having suffered no injury-in-fact from the seizure of defendant funds. In the alternative, the government requests that the court grant it summary judgment because no issues of material fact exist with respect to whether the defendant funds are substantiality connected to illegal activity. Cardona, for his part, asserts that the defendant funds belong to him, that he was aggrieved by their seizure, that certain evidence obtained during the government's search of his person and his home be suppressed and that there are no grounds for forfeiture because defendant funds are not substantiality connected to an illegal activity. Cardona asserts that, at the very least, there are material issues of fact related to the ownership and origin of a portion of defendant funds and summary judgment therefore is inappropriate. For the reasons set forth below, plaintiff's motion to strike the claim is denied, the suppression motion is denied in part and granted in part and plaintiff's motion for summary judgment is granted.

FACTS AND PROCEDURAL HISTORY

In the Fall of 1998, the New York City Police Department's Organized Crime Investigation Division's Money Laundering Unit ("MLU") began investigating money laundering organizations operating in New York City. Plaintiff's Statement Pursuant to Local Civil Rule 56.1 ("Pl. Rule 56.1 Stat.") ¶43; Supplemental Affidavit in Support of Search Warrant signed by Andrew Buchanan ("Buchanan Supp. Aff") annexed as Exhibit 11 to the Declaration of Laura D. Mantell ("Mantell Decl."). Among the targets of the MLU's investigation were two brothers, Andreas and Hernan Botero, and their mother, Luz Marina Gomez Alzate. Pl. Rule 56.1 Stat., ¶44; Declaration of Joseph Thompson ("Thompson Decl."), ¶2. MLU officers obtained a court ordered eavesdropping warrant for telephone number 917-861-7003, a number associated with Alzate. Based on the intercepted conversations, MLU officers learned that Alzate would contact either Andreas or Hernan to arrange for exchanges of cash.

On September 29, 2000, the MLU intercepted a conversation between Alzate and Andreas in which Alzate told Andreas to expect a call the following day regarding a "package." MLU officers believed "package" was code for a delivery of cash. Buchanan Supp. Aff. ¶7.

On September 30, the MLU intercepted a telephone conversation between Andreas and an "unidentified male" who was later identified as Cardona.*fn1 Pl. Rule 56.1 Stat. ¶48; Buchanan Supp. Aff. ¶8. Andreas and Cardona arranged to meet outside an auto parts shop located at 97th Street and Northern Boulevard in Queens at 3:15 p.m. Buchanan Supp. Aff. ¶ 9. At the appointed time, MLU officers observed Andreas meet with Cardona at the corner of 97th Street and Northern Boulevard. Pl. Rule 56.1 Stat. ¶ 49; Buchanan Supp. Aff. ¶ 9. After a brief discussion, Andreas left the scene in a livery cab.*fn2 Id. Cardona walked one block to his home, a basement apartment located 97-09 32nd Avenue. Affidavit in Support of Search Warrant signed by Andrew Buchanan ("Buchanan Aff"), annexed as Exhibit 10 to the Mantell Decl. ¶ 8; November 5, 2004 deposition of Edison Cardona ("C.Dep1.") 76. Two hours later, at approximately 5:10 p.m., Cardona emerged from his home, walked back to the auto parts shop and met with an unidentified individual. Pl. Rule 56.1 Stat. ¶¶ 50-51; Buchanan Aff. ¶ 8. At this point, an MLU officer confronted both Cardona and the unidentified individual and asked for identification. Id. Cardona produced a New York State driver's license with his name on it. Id. The address on the license was 25-30 Broadway, Astoria, Queens.*fn3

Two weeks later, on Thursday, October 12, MLU officers intercepted a call in which a man, believed to be Cardona, told Andreas that he had $400,000 to deliver to him. Buchanan Supp. Aff ¶ 13. Based on this conversation, MLU officers conducted surveillance in the vicinity of 97-09 32nd Avenue, Cardona's home. Buchanan Supp. Aff. ¶13-14. According to affidavits filed by the police, Cardona left his home around 3:00 p.m. with an olive green duffle bag and drove his car to 103rd Street and Lewis Avenue in Corona, Queens. Pl. Rule 56.1 Stat. ¶¶ 53-55; Buchanan Aff. ¶9. Near that location and shortly thereafter, Cardona met with a man later identified as Wilson DeJesus Castano Giraldo. Buchanan Aff. ¶ 9. Both men walked back to Cardona's car and Cardona gave Giraldo the olive green duffle bag.*fn4 Buchanan Aff. ¶ 10. Cardona, in his deposition, denies he left his home at 3:00 p.m. C.Dep2, 121. Cardona claims that, on the morning of October 12, 2000, he went to search "around Roosevelt Avenue" for German Pulgarin, a man who was supposed to sell Cardona a printing business for $50,000. Id. Cardona did not find Pulgarin and returned home at about 11:30, watched television, took a nap, and only left his home again at around 5:00 p.m. C.Dep2, 121-122, 131.

At either 5:00 p.m. or 5:45 p.m., Cardona left his home carrying a plastic shopping bag.

Buchanan Aff. 12; Pl. Rule 56.1 Stat. ¶ 59; Cl. Rule 56.1 Stat. ¶ 59. Cardona drove two blocks from his home to 82nd Street and Roosevelt Avenue. Buchanan Aff. ¶ 12; Pl. Rule 56.1 Stat. ¶ 59; C.Dep1, 131. Cardona was observed driving around for one-half hour while making calls on his cellular telephone. Buchanan Aff. ¶13; Pl. Rule 56.1 Stat. ¶ 59. According to Cardona, he left his home with $50,000 in a shopping bag and drove to meet with Pulgarin to purchase the printing business but, as had happened earlier that day, he failed to find Pulgarin. C.Dep2, 133-145; Cl. Rule 56.1 Stat. ¶ 59; Cardona Decl. 34. Approximately one-half hour later, Cardona parked the car and returned home, shopping bag in hand. C.Dep2, 145-146; Buchanan Aff. ¶13. Upon reaching his home, MLU officers approached Cardona and asked Cardona where he lived and where he was going.*fn5 Buchanan Aff. ¶15; Cardona Decl. ¶34-35; Rule 56.1 Stat. ¶ 60. According to the government, when approached, Cardona produced his driver's license with the Astoria address but stated that he actually lived with a friend in the rear apartment of 97-09 32nd Avenue. Buchanan Aff. ¶15. The police then searched Cardona and observed that the bag had large quantity of U.S. currency wrapped in plastic with brown packing tape and the number "50" written on it. Id. Cardona was arrested.

Without contradicting the government, Cardona offers a slightly more nuanced account of the initial confrontation between himself and the MLU officers, which the court is required to accept as true for the purposes of the government's summary judgment motion.*fn6 Cardona claims that when the MLU officers approached him, they asked what was in the bag he was holding.

C.Dep2, 147. Cardona responded by telling them there was $50,000 in the bag and he planned to purchase a business.*fn7 Id. When pressed, Cardona explained he worked in graphic arts, and showed the officers pay stubs from his former employer, a story the MLU officers found incredible. Id at 150. Cardona claims that this confrontation was much more violent, and the MLU officers pushed him against a parked van. In Cardona's account, the MLU officers threw him to the ground and placed a foot on the back of his neck. C.Dep2, 149-150; Cardona Decl. ¶ 40.*fn8

With Cardona now detained, Johnny Fisi, who lived in the rear apartment of 97-09 32nd Avenue, told the MLU officers that Cardona lived with him, and he led the officers to the apartment. Id; Pl. Rule 56.1 Stat. ¶ 62.*fn9 However, upon the officers' brief search of the apartment, Fisi explained that Cardona in fact lived in the front basement apartment of 97-09 32nd Avenue, not the rear one. Buchanan Aff. ¶15; Cardona Decl. 42. Cardona maintained that he lived in the rear apartment. Buchanan Aff. ¶15. The MLU officers asked Cardona for the keys to the front apartment. Buchanan Aff. ¶15; Cardona Decl. 38. At first, Cardona refused to give the MLU officers the keys, but then offered to let them in. Buchanan Aff. ¶16. However, upon reaching the door, Cardona threw the keys inside the apartment and shouted to someone in the apartment. Id. The police then attempted to push the door open but, before they could do so, Oscar Torres opened the door.*fn10 Id. at 17. The police asked Torres to leave the apartment so they could conduct a "protective sweep" of the premises. Id; Rule 56.1 Stat. ¶ 65. During the sweep, the police detected a strong odor of marijuana and observed a blue duffle bag in a closet without doors. Buchanan Aff. ¶17; Pl. Rule 56.1 Stat. ¶ 66. Cardona, who claims to have been handcuffed at the time, was then led into the apartment. C.Dep2, 161. Once inside, Cardona stated that the bag contained $400,000 in cash. Buchanan Aff. ¶18; Pl. Rule 56.1 Stat. ¶ 67.

With respect to the officers' entry of his home, Cardona claims that, after a search of Fisi's rear apartment (in the mistaken belief that Cardona lived there), the MLU officers broke down the door leading to the common area that Cardona and Torres shared. Id. at 153. Torres was allegedly sleeping immediately behind the front door at the time the police forcefully entered. C.Dep2, 153. Once inside, the offers encountered a second locked door, this one to Cardona's separate living area. Id. Cardona then unlocked the door to his living area, partially because he believed that the MLU officers would break it down otherwise. Id. at 153 ("they were about to break the door where I live and told them that I had the keys."). Cardona also claims he was arrested outside his home. Id at 151, 160.

The MLU officers applied for and received a search warrant issued by New York State Supreme Court Justice John A. Barone on the strength of their observations and Cardona's statements that the bag in his room contained $400,000. Mantell Decl., Exhibit 10-11, 13; Pl. Rule 56.1 Stat. ¶ 68. The warrant was executed immediately thereafter. Thompson Decl. ¶ 4; Pl. Rule 56.1 Stat. ¶ 74. MLU officers found and seized $468,826, a black composition notebook containing currency records, a list of phone numbers, and amounts that the government claims to be related to money laundering activity. Thompson Decl. ¶ 4; Thomasina Decl., Exhibit 1; Pl. Rule 56.1 Stat. ¶ 74. One of the numbers on listed is 917-861-7003, the number associated with Alzate. Thomasina Decl., Exhibit 1; Pl. Rule 56.1 Stat. ¶ 75. One of the entries on the list has the name "Wilson" with the number "80". See Thomasina Decl., Exhibit 1; Pl. Rule 56.1 Stat. ¶ 77. Cardona admits that the list belongs to him and is in his handwriting, but claims that it relates to his efforts to distribute "small amounts of money" to Colombian friends. C.Dep2, 181; Cardona Decl. ¶55. He further states that government tampered with the list. Cl. Rule 56.1 Stat. ¶ 75-76; Cardona Decl. 15.

After the officers had secured the apartment, Cardona was transported to 115th Precinct for questioning. Pl. Rule 56.1 Stat. ¶ 69. Cardona claims that he was arrested, transported to the precinct and questioned, but was never provided Miranda warnings. The government is silent as to whether Cardona was given his Miranda warnings and whether he was ever in custody. According to the government, and as corroborated by the affirmation of Ismael Gonzalez, Cardona's former counsel ("Gonzalez Aff."), annexed as Exhibit 18 to the Mantell Decl., Cardona stated that he was paid $5,000 to store the suitcase. Gonzalez Aff. § 5. According to the complaint, but now denied by Cardona, Cardona admitted to the police under questioning that: (1) he had received the money from three different people from October 9 to October 12 (Compl.¶ 65; Pl. Rule 56.1 Stat. ¶ 70); (2) he intended to deliver the money to other people and had received a commission for doing so (Compl.¶ 68; Pl. Rule 56.1 Stat. ¶ 71); (3) he would receive a telephone call from someone telling him where to deliver the money (Compl.¶ 69; Pl. Rule 56.1 Stat. ¶ 72); (4) he gave $50,000 to a man that afternoon, but did not know the man's identity (Compl.¶ 69; Pl. Rule 56.1 Stat. ¶ 71); and (5) he thought the money might be "bad money" or "drug money" (Compl.¶ 70, 73-74; Pl. Rule 56.1 Stat. ¶ 73). Cardona was never charged with any crime.*fn11

Relevant to the determination of both the motion to dismiss under Rule 12(f) and the motion for summary judgment under Rule 56 is whether there is a legitimate source for the defendant funds. Cardona claims that he had a thriving business exporting used printing presses to Colombia. Cardona Decl. ¶8. Cardona claims that he came to the United States with $30,000. Cardona Decl. ¶7. Cardona included a chart demonstrating that from 1992 to 1999 his income from his job at Tristar (a printing company where he worked), his wife's income and his income from selling the used printing presses totaled $629,266.*fn12 See Ward Decl. Exhibit 2. Id. Curiously,Cardona claimed a total of only $378,815 in gross income on tax returns filed from 1992-1999, exclusive of 1997, a year for which Cardona did not produce a tax return. See Pl. Rule 56.1 Stat. ¶¶3-13.

By his own calculation, from the $629,266 that Cardona claimed he earned from 1992 through 1999 both in wages and by selling printing equipment, he was able to save at least the $518,826, constituting defendant funds. Ward Decl. Exhibit 2. Thus, Cardona's living expenses were the difference between what he earned and what he saved: $110,440. Id. This equals, on average about $15,777 in living expenses per year over seven years. At his deposition, Cardona testified that he spent $150 a month on food, $60 a month on union dues, $50 a month on entertainment, and $400 per year in clothing. His phone bills were, on average $40 per month. Pl. Rule 56.1 Stat. ¶14. Cardona also had car expenses, and traveled to Colombia approximately six to eight times since he moved to the United States. Pl. Rule 56.1 Stat. ¶16. From 1993 to 1999, exclusive of 1997, Cardona reported $44,083 in deductible expenses on his tax returns, including job related expenses, non-reimbursed medical expenses, charitable gifts, child care expenses and losses from theft. Pl. Rule 56.1 Stat. ¶¶18-25. In addition, Cardona's rent has ranged from $250 per month to $400 per month. Pl. Rule 56.1 Stat. ¶26. Since coming to the United States, Cardona has owned several used cars and has lived in a variety of apartments. One apartment did not have heat and he was required to share another with a dog. Pl. Rule 56.1 Stat. ¶27. According to Cardona, he lived frugally in an effort to save money to purchase a home and a business. Cardona Decl. ¶¶ 29, 54.

Cardona was not only hoarding cash in his home; he also maintained several bank accounts. Pl. Rule 56.1 Stat. ¶33. From August to October 2000, around the time of the seizure, Cardona had approximately $26,000 in two banks and often made withdrawals from the accounts. Pl. Rule 56.1 Stat. ¶¶34-35. Cardona testified that he did not trust banks, and instead kept the majority of his money at home or in "cabinets of machines at work that [he] could keep locked." Cardona Decl. Pl. ¶¶19-20. Thus, Cardona claims that the bulk of his savings was in his home on the evening of October 12, 2000, when it was seized by MLU officers.

On November 28, 2000, the government filed a verified complaint against defendant funds in rem. The complaint alleges that the defendant funds constitute property involved in and proceeds traceable to transactions or attempted transactions in violation of 18 U.S.C. §§ 981 and 1956 (money laundering), and proceeds traceable to violations of 21 U.S.C. § 841 et seq. (controlled substances) and are therefore subject to seizure and forfeiture under 18 U.S.C. § 981 and 21 U.S.C. § 881. Finding that the government had established the requisite cause for the seizures, U.S. Magistrate Judge Viktor V. Pohorelsky issued warrants for arrest of the funds on December 5, 2000. On February 7, 2001, claimant filed a claim for $518,826 of the defendants funds, and answered the complaint on the same day.

DISCUSSION

Motion to Strike the Claim for Lack of Standing Standard of Review Fed. R. Civ. P. 12(f) provides: "[u]pon motion made by a party before responding to a pleading . . . the court may order stricken from any pleading any insufficient defense." In a civil forfeiture action, such as this one, Rule 12(f) provides the proper procedural basis for the government's motion to strike Cardona's claim to a portion of the defendant funds because Cardona is akin to an intervenor-defendant and his claim amounts to a defense to the forfeiture. See United States v. $79,000 in Account Number 2168050/6749900 at the Bank of New York, 96 CIV 3493, 1996 WL 648934, at *2 (S.D.N.Y. Nov. 7, 1996). The standard of review for a 12(f) motion is identical to that of a 12(b)(6) motion and the court's review is limited to the facts alleged in the complaint, answer and the notices of ...


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