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United States of America v. $421

July 27, 2011

UNITED STATES OF AMERICA PLAINTIFF,
v.
$421,090.00 IN UNITED STATES CURRENCY,
DEFENDANT,
v.
MICHAEL MORALES, CLAIMANT.



The opinion of the court was delivered by: John Gleeson, United States District Judge:

MEMORANDUM AND ORDER

On January 21, 2011, the United States filed a verified complaint in rem against $421,090 in United States currency (the "defendant funds"), seeking civil forfeiture of the defendant funds pursuant to 21 U.S.C. 881(a)(6). On April 1, 2011, Michael Morales filed a verified claim asserting an interest in the defendant funds.*fn1 The government now moves to dismiss Morales's claim for lack of standing pursuant to Rule G(8)(c)(ii)(B) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"), or, in the alternative, for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, the government's motion is denied.

BACKGROUND

A. The Government's Allegations

The funds were seized on August 12, 2010. According to the government's complaint, on that date, agents from the United States Drug Enforcement Administration ("DEA") observed Morales open the trunk of a car and look at two black suitcases inside. Morales then closed the trunk, got into the car, and drove away. The DEA agents followed and subsequently stopped the car on the basis that it had illegally tinted windows. As the agents approached the car after the stop, they saw a marijuana cigarette in Morales's possession. Morales got out of the car at the direction of the agents and consented to have it searched. The agents discovered the defendant funds inside the suitcases in the trunk. The funds were arranged in pre-determined bundles held together by rubber bands. Upon questioning, Morales claimed that he was borrowing the car from his brother, who had told him there was some money inside the trunk. Morales said the money might belong to his brother's father-in-law, "Charles," who owned several strip clubs in New York. Morales explained to the DEA agents that his brother and Charles in this case, and any future claim would be often traveled to give money to people who had been involved in disasters. Morales suggested that the defendant funds might have been intended for disaster victims.

B. Morales's Allegations

Morales admits that the defendant funds were seized on August 12, 2010 from a vehicle he was driving, but he disputes many of the facts surrounding the seizure. According to Morales, he did not open the car's trunk before getting into the car and driving off. He also denies that the car had illegally tinted windows, and he claims that he was not holding a marijuana cigarette at the time he was pulled over. He admits that the DEA agents recovered a marijuana cigarette when they searched the vehicle but contends that they could not have seen it before they searched the car. According to Morales, the DEA agents who approached the car after the stop told him that the car had been involved in a robbery. He claims he was handcuffed the moment he stepped out of the car, and that he never gave permission to search. In fact, Morales alleges that he specifically and repeatedly denied the agents permission to open the trunk. Nonetheless, they eventually did so by pushing buttons on his keychain without his authorization.

Morales admits that he told the agents the car belonged to his brother, but he claims he never told them that his brother had informed him there was money in the trunk. Morales also denies that he said anything to the DEA agents about "Charles." In answer to Special Interrogatories submitted to him by the government, Morales claimed that he "received the Defendant Funds from another individual known only as 'Primo,' whereby [Morales] would retain $25,000 in United States currency from the Defendant Funds." Morales provided no further information about Primo and no corroboration for his claim, except to state that Primo would have knowledge of the facts supporting his claim.

Also in response to the Special Interrogatories, Morales admitted to four prior arrests. First, he was arrested in June 2009 for possession of stolen property. He plead guilty to disorderly conduct. In September 2010, he was arrested for possession of marijuana. According to Morales, that case is scheduled to be dismissed. Morales was again arrested for marijuana possession in March 2011, and he plead guilty to disorderly conduct. Finally, a case is currently pending against Morales for possession of a controlled substance. In answer to the Special Interrogatories, Morales also admitted that he did not file federal or state income tax returns between 2005 and 2010.

C. Procedural History

After the funds were seized on August 12, 2010, the DEA commenced administrative forfeiture proceedings against them. On November 10, 2010, Morales filed a claim to the funds with the DEA in the administrative proceedings. The government filed its complaint in rem in this court on January 1, 2011. On April 1, 2011, Morales filed his claim in this action. On April 20, 2011, he filed a verified answer to the complaint. The motion now before me followed on June 24, 2011. Oral argument was heard on the motion on July 22, 2011.

DISCUSSION A. The Legal Framework Governing Civil Forfeiture Actions Pursuant to 21 U.S.C. § 881(a)(6), "[a]ll moneys . . . furnished or intended to be furnished by any person in exchange for a controlled substance [and] all proceeds traceable to such an exchange" are subject to civil forfeiture. Rules governing civil forfeiture proceedings are set out in 18 U.S.C. § 983 and Supplemental Rule G. Under 18 U.S.C. § 983(1), where the government executes a seizure pursuant to a civil forfeiture statute such as 21 U.S.C. § 881, it must provide notice to interested parties. Any person claiming an interest in the seized property may file a claim with an appropriate official.

18 U.S.C. § 983(2). Where a claim has been filed, the government must commence a civil action in rem by filing a complaint for forfeiture in an appropriate court. Id. § 983(3)(A); Supp. R. G (1), (2). Any person claiming an interest in the property may then contest the forfeiture by filing a claim in the court where the civil action is pending. 18 U.S.C. § 983(4); Supp. R. G(5). However, "[b]efore a claimant can contest a forfeiture, he must demonstrate standing." Mercado v. U.S. Customs Service, 873 F.2d 641, 644 (2d Cir. 1989). If a claimant has standing, a court may then proceed to determine whether the government has established a sufficient basis for forfeiture. See United States v. 38,000.00 in U.S. Currency, 816 F.2d 1538 (11th Cir. 1987).

Pursuant to the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), Pub.L. No. 106-185, 114 Stat. 202, 18 U.S.C. § 983, the government must prove its right to forfeiture of an asset by a preponderance of the evidence. 18 U.S.C. § 983(c)(1) ("the burden of proof is on the Government to establish, by a preponderance of the evidence, that the property is subject to forfeiture"). In addition, "if the Government's theory of forfeiture is that the property was used to commit or facilitate the commission of a criminal offense, or was involved in the commission of a criminal offense, the Government shall establish that there was a substantial connection between the property and the offense." Id. § 983(c)(3). To prevent forfeiture, a claimant who has standing "may either rebut the government's proof of a substantial connection or raise an innocent owner defense under CAFRA." Von Hofe v. United States, 492 F.3d 175, 180 (2d Cir., 2007). An "innocent owner" is an owner of the property the government seeks to have forfeited who ...


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