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In re Any & All Funds on Deposit

United States District Court, E.D. New York

June 9, 2014


For Roger & Sons, Inc., Movant: Paula Schwartz Frome, Esq., of Counsel, KASE & DRUKER, ESQS., Garden City, New York.

For United States, Respondent: Melanie D. Hendry, Laura D. Mantell, Assistants, U.S. Attorneys, of Counsel, United States Department of Justice, Eastern District of New York, LORETTA E. LYNCH, United States Attorney, Brooklyn, New York.

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ARTHUR D. SPATT, United States District Judge.

On March 21, 2014, Roger & Sons, Inc. (the " Movant" or the " Company" ), initiated this motion by filing an Order to Show Cause seeking the release of the sum of $294,397.11 and all further amounts frozen, constituting the funds in Wells Fargo Bank NA account number XXXXXXXXX6466 held in the name of Roger & Sons, Inc. (the " Subject Account" ). On April 4, 2014, the Court granted Rogers & Sons request for a hearing concerning the Government's seizure of the Movant's funds. For the reasons that follow, the Court denies the Movant's motion in its entirety.


The Movant is a New York Corporation that sells commercial restaurant equipment in New York City. The United States is the " Respondent."

According to the Respondent, from January 30, 2013 to September 26, 2013 (the " Relevant Period" ), the Movant made sixty-eight structured cash deposits totaling approximately $597,920 into the Subject Account in violation of 31 U.S.C. § 5324(a)(3). In this regard, 31 U.S.C. § 5313 requires a domestic financial institution to file a Currency Transaction Report (" CTR" ) when it is involved in a transaction involving the payment, receipt or transfer of U.S. Currency in an amount greater than $10,000. When individuals take active steps to cause financial institutions to avoid filing CTRs so as to prevent the detection of the movement of large amounts of cash, called " structuring," they violate 31 U.S.C. § 5324(a)(3). These structuring steps involve making multiple cash deposits or withdrawals in amounts less than $10,000.01 on the same day or consecutive days before and after, in order to avoid the filing of CTRs.

In this case, the Respondent accuses the Movant of making sixty-eight structured cash deposits during the Relevant Period. Many of these deposits were in the $9,000 plus range, thus just under $10,000.01, and were made on consecutive days.

On January 29, 2014, in Case No. 14-MJ-83, United States Magistrate Judge William D. Wall found probable cause to believe that at least $597,920 was structured into the Subject Account during the Relevant Period and therefore, that these funds were subject to forfeiture under the provisions of 31 U.S.C. § 5317 as property involved in violations of 31 U.S.C. § 5324. Accordingly, Judge Wall issued a seizure warrant for the Subject Account. On or about February 14, 2014, the Respondent

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seized funds from the Subject Account amounting to $293,397.11 (the " funds" ).

On March 21, 2014, the Movant commenced this action seeking the release of the funds. Relying on the provisions of 18 U.S.C. § 983(f), the Movant argues that the seizure of the funds is causing it substantial hardship and that should the funds be released, they will remain available at the time of trial. The Movant also claims that it has been denied due process and that its Eighth Amendment rights under the United States Constitution have been violated, because the Respondent seized the funds without affording the Movant a pre-seizure hearing or a prompt post-seizure hearing. Finally, the Movant alleges that it has not committed any structuring violations.

On April 2, 2014, the Respondent commenced a civil action in rem to forfeit and condemn to the use and benefit of the Government, the funds seized from the Subject Account on February 14, 2014 pursuant to the warrant issued by Judge Wall on January 29, 2014. The next day, on April 3, 2014, the Respondent filed a memorandum of law opposing the release of the funds to the Movant. In this regard, the Respondent argues that: (1) § 983(f) does not apply in this case because the Movant business had not been seized; (2) the Movant had not satisfied all of the factors required for the Court to grant relief under § 983(f), namely substantial hardship or that its potential hardship outweighs the risk that the funds will be dissipated during the pendency of the forfeiture proceeding; and (3) that the Movant's due process and Eighth Amendment claims are without merit.

On April 4, 2014, the parties appeared in response to the Movant's order to show cause. After the parties presented their arguments, the Court determined that it would afford the Movant a formal hearing to contest the seizure of the funds. The hearing was scheduled for April 9, 2014.

Thereafter, on April 8, 2014, the Respondent filed a letter asking the Court to only consider whether the Movant satisfied its entitlement to a hardship release of the seized funds pursuant to 18 U.S.C. § 983(f). The Respondent contended that the Movant was not entitled to a post-deprivation hearing in which it may challenge the underlying probable cause finding that authorized the seizure of the funds.

II. The Hearing

The Hearing in this matter was held on April 9, 2014. As stated above, the Hearing involved the request by Movant Roger & Sons, Inc., for an Order pursuant to 18 U.S.C. § 983(f), releasing the sum of $293,397.11, held by the Government. Two witnesses testified, one for each party. In the Movant's case, Joseph Cirone testified. He is one of the principals of the Movant and has been the President of the company since 1985. The Movant sells food service equipment and supplies. The business is located at 268 Bowery Street in Manhattan, New York. In their business they receive payments in the form of cash, checks and credit cards. The company had one bank account which is with Wells Fargo Bank, in which deposits of cash, checks and wire transfers were made.

In January 2014, even though it was not served with a warrant of arrest, the Movant learned that their bank account was seized. There was a lien recorded on its account. The Movant did not learn how this lien originated. This activity by the Government had an adverse effect on the Movant's business. Checks written by the company were not paid. There was no money remaining in the Movant's account at Wells Fargo Bank. The company has eleven employees and had to pay rent and

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payroll with funds in that account. In order to pay its employees, the Movant wrote checks from another company called Roger & Sons Wholesale, Inc., treated as a loan to the Movant. Also, the Movant paid its employees with payroll checks by Bowery Bay Realty Co., for the period from the last week of January 2014 and the first week of February 2014. The payroll checks were marked as a " loan." (See Movant's Ex. B).

In addition, Cirone personally borrowed money from the 268 Bowery Realty Co. and also applied for a loan from the American Express Co. The loan and security agreement, in the sum of $179,000, is in evidence as Movant's Ex. C. Also in evidence is a check from 268 Bowery Realty Co. to Roger & Sons, Inc., in the sum of $40,000, representing a loan. (See Movant's Ex. D). None of the loans have been repaid, not even in part, except that American Express charges the company $15,637.91 per month.

Cirone testified that these loans have not restored business lost as a result of the Government's action. He stated that the company cannot pay its bills without the funds at issue. However, there have been no additional loans applied for by the company. An effect of the Government seizure has been to make it extremely difficult for the Movant to pay vendors. January and February are slow months for the company and business picks up in March and April. Also, the summer is a quiet period. However, the Movant also made sure that it paid its bills on time. The company records its cash sales on a weekly basis. (See Movant's Ex. E). Then Cirone logs in taxable and non-taxable sales for the week. The non-taxable sales are wholesale sales. The sales are reported to the Movant's accountant on a monthly basis so he could calculate their sales tax. (See Movant's Ex. F).

The company uses cash to pay vendors and for its payroll and some cash is used throughout the course of the business. Cirone and his two partners each take $2,000 per week in cash as part of their payroll. His two partners are his brothers-in-law Anthony Saitta and Carl Saitta. The cash ledger is in evidence as Movant's Ex. G. The company deposit slips as to both cash and checks are also in evidence as Movant's Ex. H. Not all cash is deposited in the company's bank accounts. Some cash is " kept" in a locked drawer. On January 30 and 31, 2014, the company deposited $9,700 and had cash left over in the sum of $9,500. On February 1, 2014, the company deposited $5,350.

In February 2013, the company made eight deposits, each of which were close to $10,000. On March 28, 2013, the company made a cash deposit of $9,400, which sum it received from one of its customers.

Cirone also testified that some cash deposits exceeded $10,000. On May 10, 2013, $19,400 in currency was deposited along with the required CTR. Significantly, he stated that there was no attempt made to " split up" the currency when making deposits. There was no attempt made to violate the $10,000 currency rule. For example, on May 22, 2013, $16,380 in currency was deposited along with the required CTR. Also, in this regard, the following day, May 23, 2013, no currency was deposited, indicating that the company did not attempt to divide the deposit. On May 28, 2013, the sum of $13,600 was deposited along with the CTR. Also, on June 4, 2013, $12,400 in cash was deposited and no cash was part of the deposits on June 3 or June 5, 2013. In addition, on June 24, 2013, $15,900 in cash was deposited, and on June 25, 2013, $17,400 in cash was deposited and no cash was in the next two deposits in the following two days. Cirone stated that these deposits demonstrated that there

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was no effort made by the company to unlawfully ...

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