Opinion
Case No. CR2-06-129.
April 16, 2007
I. OPINION AND ORDER
This matter is before the Court on Defendant Lance K. Poulsen's Motion to Dismiss Notice of Lis Pendens filed by the Government on certain property owned by the Defendant and located in Florida. For the reasons set forth below, Defendant's Motion is DENIED. In addition, the Government's Notice of Removal of Defendant's action in the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida, Case No. 07000910CA is STRICKEN and the action is REMANDED back to the Charlotte County Court.
II. BACKGROUND A. Facts
On May 19, 2006, Defendant and six other individuals were charged in a 60-count indictment alleging violations of 18 U.S.C. § 371, 15 U.S.C. §§ 77q(a) and 77x (Securities Fraud); 18 U.S.C. § 1343 (Wire Fraud); 18 U.S.C. § 1341 (Mail Fraud); 18 U.S.C. § 1956(h) (Money Laundering Conspiracy); 18 U.S.C. § 1956(a)(1)(A)(I) (Promotion Money Laundering) and 18 U.S.C. § 2. Count 60, a forfeiture claim, asserts the following:
Each defendant who is convicted of Count 1 (conspiracy) and Counts 2-37 shall forfeit to the United States, pursuant to 18 U.S.C. § 981(a)(1)(c) and 28 U.S.C. § 2461(c), any property constituting or derived from proceeds obtained directly or indirectly as a result of the said violation, including but not limited to a sum of money in the amount of approximately $1,900,000,000 representing the proceeds from the conspiracy to violate statutes of the United States. . . . If more than one defendant is convicted of an offense, the defendants so convicted are jointly and severally liable for the amount involved in such offense.
Pursuant to 18 U.S.C. § 982, each defendant who is convicted of one or more of the offenses set forth in Count 38 (money laundering conspiracy . . .) or Counts 39-59 (money laundering) shall forfeit to the United States the following property:
(a) All right, title, and interest in any and all property involved in each offense . . . for which the defendant is convicted, and all property traceable to such property. . . .
(b) A sum of money equal to approximately $1,900,000,000 representing the total amount of money involved in each offense, or involved in the conspiracy to commit violations . . . as charged in Count 38, for which the defendant is convicted. If more than one defendant is convicted of an offense, the defendants so convicted are jointly and severally liable for the amount involved in such offense.
Pursuant to 21 U.S.C. § 853(p), as incorporated by 18 U.S.C. § 982(b) and 28 U.S.C. § 2461(c), each defendant shall forfeit substitute property, up to the value of the amount described in the foregoing paragraphs, if, by any act or omission of a defendant, the property described in such paragraphs, or any portion thereof, cannot be located upon the exercise of due diligence; has been transferred, sold to or deposited with a third party; has been placed beyond the jurisdiction of the court; has been substantially diminished in value; or has been commingled with other property which cannot be divided without difficulty.
Indictment at ¶ 135-37 (emphasis added).
Count 60 does not specifically list any property allegedly involved in each charged offense or any property traceable to such offenses.
On December 21, 2006, the Government filed a lis pendens with respect to Defendant's property located at 4551 Grassy Point Boulevard, Port Charlotte, Florida 33952 (the "Grassy Property").
B. Procedural History
On March 20, 2007, Defendant filed at Motion to Dismiss Notice of lis pendens with respect to the Grassy Property in this Court. The Government filed an Opposition to Defendant's Motion on March 29, 2007. Defendant replied on April 6, 2007. As such, Defendant's Motion is now ripe for this Court's review.
In addition, on March 27, 2007, Defendant and his wife filed an Emergency Petition To Dissolve Notice of Lis Pendens in the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida, Case No. 07000910CA (the "Charlotte County Action"). On April 3, 2007, the Government filed a Notice of Removal divesting the Charlotte County Court with jurisdiction pursuant to 28 U.S.C. § 1446. In Defendant's reply brief in this action, Defendant asks this Court to strike the Notice of Removal because it is improper.
28 U.S.C. § 1446(a) states that:
A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.
III. LAW AND ANALYSIS
Defendant contends that the Grassy Property is not subject to pretrial restraint because it is a "substitute asset," which can only be restrained by the Government after a conviction. Additionally, Defendant argues that the notice of lis pendens is void under Florida law. Finally, Defendant argues that the notice should be dismissed because it was placed on the property in a manner which violated this Court's October 27, 2006 pre-trial order.
Defendant asserts that the Grassy Property is a substitute asset under 21 U.S.C. § 853, and, therefore, is not subject to pretrial restraint by the Government. The Government contends that the Grassy Property is not a substitute asset, and is therefore subject to pretrial restraint, and that the lis pendens filed on the remaining properties does not constitute a judicial restraint, but rather only a market restraint.
Section 853(a) defines three categories of assets-assets associated with the crime-that must be forfeited upon a conviction of 18 U.S.C. §§ 1956 and 1957: (1) assets that constitute, or derive from, proceeds obtained directly or indirectly as the result of the charged violations; (2) assets that were used or intended to be used to commit or facilitate the commission of such violations; and (3) in the case of a continuing criminal enterprise, any interest in, claims against, or property or contractual rights affording a source of control over the continuing criminal enterprise. Section 853(e)(1) authorizes post-indictment/pretrial restraint of "property described in subjection (a)." An entirely separate subjection of section 853, subsection (p), authorizes forfeiture of substitute property if property listed in subsection (a) is unavailable. The pretrial restraint provisions of § 853(e) refer only to subjection (a) assets and not to subjection (p) assets.
Section 853(e) provides (emphasis added):
1) Upon application of the United States, the court may enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property described in subsection (a) of this section for forfeiture under this section —
(A) upon the filing of an indictment or information charging a violation of this subchapter or subchapter II of this chapter for which criminal forfeiture may be ordered under this section and alleging that the property with respect to which the order is sought would, in the event of conviction, be subject to forfeiture under this section;. . . .
Section 853(p) provides:
(1) In general
Paragraph (2) of this subsection shall apply, if any property described in subsection (a), as a result of any act or omission of the defendant —
(A) cannot be located upon the exercise of due diligence;
(B) has been transferred or sold to, or deposited with, a third party;
(c) has been placed beyond the jurisdiction of the court;
(D) has been substantially diminished in value; or
(E) has been commingled with other property which cannot be divided without difficulty.
(2) Substitute property
In any case described in any of subparagraphs (A) through (E) of paragraph (1), the court shall order the forfeiture of any other property of the defendant, up to the value of any property described in subparagraphs (A) through (E) of paragraph (1), as applicable.
Therefore, the question for the Court is whether § 853 permits restraint of substitute assets before conviction, where such pretrial restraint provision, § 853(e), only refers to assets associated with the crime. This question has caused conflict among the circuits. Compare United States v. Field, 62 F.3d 246, 248-50 (8th Cir. 1995) (pretrial restraint not permitted); United States v. Ripinsky, 20 F.3d 359, 362-63 (9th Cir. 1994) (pretrial restraint not permitted); United States v. Floyd, 992 F.2d 498, 502 (5th Cir. 1993) (pretrial restraint not permitted); In re Assets of Martin, 1 F.3d 1351, 1357-61 (3d Cir. 1993) (pretrial restraint not permitted under substantially identical provisions of RICO, 18 U.S.C. § 1963) with In re Billman, 915 F.2d 916, 921 (4th Cir. 1990) (pretrial restraint permitted under RICO, 18 U.S.C. § 1963, provisions substantially identical to the statute in issue here), cert. denied, 500 U.S. 952 (1991); United States v. Regan, 858 F.2d 115, 121 (2d Cir. 1988) (advising district courts to consider pretrial restraint of substitute assets under RICO when restraining fruits of crime would be burden to third parties); but see United States v. Gotti, 155 F.3d 144 (2nd Cir. 1998) (limiting Regan to its facts and holding that 18 U.S.C. § 1963, a substantially identical statute to the statute at issue here, provides no authority for pretrial restraints of substitute assets).
The Sixth Circuit, while not having ruled directly on this issue, did note in United States v. Ford, 64 Fed. Appx. 976 (6th Cir. 2003), that although at the time of judgement non-criminally related assets are restrainable and potentially forfeitable as substitute assets, the government can not restrain such substitute assets prior to trial. The Sixth Circuit explained, "of course, the government is not barred from retaining previously seized, but non-tainted assets after trial as substitute assets. This fact, though does not create a proprietary interest in the assets during the period between seizure and the judgment. . . ." Ford, 64 Fed. Appx. at 982.
This Court, following the Sixth Circuit in Ford, holds that 21 U.S.C. § 853 does not authorize the pretrial restraint of substitute assets. As the Fifth Circuit, explained, Section 853(e)
plainly states what property may be restrained before trial. Congress made specific reference to the property described in § 853(a), and that description does not include substitute assets. Congress treated substitute assets in a different section, § 853(p). To allow the government to freeze [the defendant's] untainted assets would require us to interpret the phrase "property described in subsection (a)" to mean property described in subsection (a) and (p).United States v. Floyd, 992 F.2d 498, 502 (5th Cir. 1993). Such reading not only honors the plain meaning of the statute, but also represents the appropriate balance between the rights of the Government and those of the accused.
In this instance, the Grassy property is not a substitute asset, but rather an asset which the government has probable cause to believe was purchased using funds garnered from Defendant's allegedly illegal activity. Internal Revenue Service Special Agent Gregory Ruwe, by way of affidavit, states that an analysis of Defendant's accounts gives him probable cause to believe that Defendant used NCFE funds in excess of $275,000 to pay the mortgage on the Grassy property. This moot's Defendant's assertion that the Grassy Property is a substitute asset, as it may now be categorized in 835(a) and subject to post-indictment/pretrial restraint.
Defendant also claims that Florida law prohibits the Government from placing a notice of lis pendens on the Grassy Property. Defendant asserts that Florida law requires that there be a "fair nexus between the apparent legal or equitable ownership of the property and the dispute embodied in the lawsuit." Chiusolo v. Kennedy, 614 So. 2d 491, 492 (Fla. 1993). While it is unclear to the court that a "fair nexus" is required by Florida law or that Chiusolo applies to a criminal case, given that Agent Ruwe traced NCFE proceeds to certain mortgage payments on the Grassy Property, this Court finds that such a fair nexus exists.
Defendant also contends that Florida law dictates that property restrained under a lis pendens is not appropriate for use in promoting actions for money judgment. DeGuzman v. Balsini, 930 So. 2d 752 (Fla. 5th DCA 2006) ("When the primary purpose of a lawsuit is to recover money damages and the action does not directly affect the title to or the right of possession of real property, the filing of a notice of lis pendens is not authorized.") This is a criminal action. Its primary purpose is not to recover a money judgment. The indictment simply seeks, as part of the possible penalty against Defendants if convicted, the forfeiture of "any property constituting or derived from proceeds obtained directly or indirectly as a result" of the charged crimes. Moreover, the thrust of the Guzman court's holding, is that "a lis pendens in this case should not have been filed because there is no connection between Balsini's litigation to enforce and require payment of child support and the real property." Id. at 754. Unlike in Guzman, in this case, the Government has shown a direct connection between the allegedly illicit activity and the proceeds used to pay the mortgage on the Grassy Property.
Defendant also states that under Florida law, Defendant's wife, as a tenant in the entirety with respect to the Grassy Property, cannot be deprived of her enjoyment of the Grassy Property. Thus, as it interferes with Defendant's wife's enjoyment of the Grassy Property, Defendant asserts that Florida law requires this Court to dimiss the notice of lis pendens attached to the property. In making this assertion, Defendant relies on U.S. v. One Single Family Residence With Out Buildings Located at 15621S. W. 209th Avenue, Miami, Florida, 894 F.2d 1511, 1512 (11th Cir. 1990) (holding that the Government is not entitled to civil forfeiture of property owned jointly by spouses under 21 U.S.C. § 881(a)(7) "as long as the spouses remain married to each other and do nothing to terminate the entireties estate"). Defendant cites verbatim several paragraphs from this case and argues that a notice lis pendens is akin to civil forfeiture for the purposes it is being used in this action. Defendant, however, neglects to cite the following:
Nothing would prevent the government from attempting to execute or levy on its interest should the entireties estate be altered by changes in circumstances or by court order. That is, we do not rule out the possibility that if the United States filed a lis pendens against the property, the government might acquire in a later forfeiture proceeding Mr. Aguilera's interest in the property should he divorce his spouse, should Mrs. Aguilera predecease him, or should their interests be transmuted into some divisible form by their actions or by law. In such case, their interests would become distinct and separable so that forfeiture of his interest in the property would not affect her rights.Id. at 1516 note 6.
Whether Defendant intentionally omitted this controlling language or failed to cite it due to simple neglect is irrelevant. The court in One Single Family clearly stated that its holding does not prevent the Government from filing lis pendens against property owned by spouses as tenants in the entirety.
Defendant also argues that the property rights granted by the Florida Constitution prevent restraint of property by notice of lis pendens. The holding in One Single Family, however, illustrates that this argument is fallacious. The Eleventh Circuit would not have held that the Government may restrain joint marital property by means of lis pendens if it violates the Florida Constitution. Defendant cites no viable precedent to the contrary.
Defendant also alleges that the Government violated this Court's order of October 30, 2006, and as a result, this Court should dismiss the notice of lis pendens on the Grassy Property. In that order, this Court mandated that the Government inform Defendants of all pending forfeiture proceeding by November 3, 2006. The Government did so. The order did not state that the Government must file all lis pendens that it intended to file by November 3, 2006. Thus, the Government is not in violation of this Court's order. For the reasons stated above, Defendant's Motion to Dismiss the Notice of Lis Pendens on the Grassy Property is DENIED.
Last, it his reply brief, Defendant asks this Court to remand the Charlotte County Action back to Florida state court. After the Government filed its notice of lis pendens in Florida, Defendant duplicatively moved to dismiss the notice in both this Court and Florida state court. Subsequently, on April 3, 2007, the Government filed a notice of removal, removing the Charlotte County Action from Florida state court into this Court. In its reply brief, Defendant asks that if the Court denies his Motion to Dismiss the Notice of Lis Pendens, that it treat his reply brief as a motion to remand the Charlotte County Action back to Florida state court. The Court will treat it as such.
Thus far, this Court has only ruled on the Motion to Dismiss the Lis Pendens filed before this Court. The Court has not yet ruled on the Motion to Dimiss that Defendant filed in the Twentieth Judicial Circuit in Charlotte County, Florida but that the Government removed to this Court pursuant to 28 U.S.C. § 1446. Before it rules on that motion, this Court must determine whether it has jurisdiction over the Charlotte County Action.
Defendant argues, for two reasons, that the Government's Notice of Removal is improper. First, Defendant argues that only a defendant or defendants may remove an action from state to federal court under 28 U.S.C. § 1446. He apparently asserts that the Government is the plainitiff and, as a result, the Government cannot remove the Charlotte County action under 28 U.S.C. § 1446. Defendant Poulsen and not the Government, however, according to Defendant Poulsen's own documents, is the plaintiff in the Charlotte County Action. See Emergency Petition To Dissolve Notice of Lis Pendens in the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida, Case No. 07000910CA, Exhibit 1 to the Government's Notice of Removal (Doc. 208) ("Plaintiffs, Lance K. Poulsen and Barbara L. Poulsen . . ." and "Plainitiff, Lance K. Poulsen is one of seven defendants . . .) Thus, Defendant's first argument is without merit.
Second, Defendant argues that, under 28 U.S.C. § 1446, an action may only be removed from state court to the United States district and division encompassing the locale where the state court action was pending. Therefore, Defendant argues that this action may only be removed to the United States District Court for the Middle District of Florida, which is the federal court encompassing Charlotte County, Florida. 28 U.S.C. § 1446 states that a defendant removing a must "file in the district court of the United States for the district and division within which" the state action is pending. Defendant is correct. 28 U.S.C. § 1446, like any jurisdictional statute, is meant to be strictly construed. Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941). The Government removed the Charlotte County Action to the wrong district court. To comply with the requirement of 28 U.S.C. § 1446, the Government should have removed this action to the United States District Court for the Middle District of Florida. This deformity, however, does not divest this court of jurisdiction. Courts have traditionally held that the geographic component of 28 U.S.C. § 1446(a) is a venue provision and not a jurisdictional one. Petersen v. BMI Refractories, 124 F.3d 1386, 1391 (11th Cir. 1997). Nonetheless, this Court STRIKES the Notice of Removal for removing the Charlotte Country Action to this Court which is not a forum of proper venue under 28 U.S.C. § 1441.
The Court frowns upon Defendant's decision to file substantially the same Motion to Dismiss the notice of lis pendens both in this Court and in Charlotte County, Florida because it is a waste of judicial resources. It further notes that pursuing a remand of the Charlotte Country Action after this Court has already ruled is a waste of judicial resources. Nonetheless, given that the law dictates that this Court strike the Government's Notice of Removal, this Court hereby REMANDS the Charlotte County Action back to the Twentieth Judicial Circuit in and for Charlotte County, Florida. If the Government wishes this Court to extend its ruling on the instant Motion to Dimiss in this action to Defendant Poulsen's Emergency Petition To Dissolve Notice of Lis Pendens in the Charlotte County Action, it must properly remove the Charlotte County Action to the United States District Court for the Middle District of Florida and then seek a change of venue.
IV. CONCLUSION
For the reasons set forth above, Defendant's Motion is DENIED. In addition, the Government's Notice of Removal of Defendant's action in the Circuit Court of the Twentieth Judicial Circuit in and for Charlotte County, Florida, Case No. 07000910CA is STRICKEN and the action is REMANDED back to the Charlotte County Court.