Forfeiture - Miscellaneous

Favorable and Noteworthy Decisions in the Supreme Court and Federal Appellate Courts

In re Rothstein, Rosenfeldt, Adler, P.A., 717 F.3d 1205 (11th Cir. 2013)

A law firm was engaged in a massive Ponzi scheme. Proceeds from the crime were deposited into the law firm’s account, along with other “legitimate” fees. The question in this case is whether the government could forfeit the money in the account on the theory that the money in the account was proceeds of the crime. The Eleventh Circuit held that the government did not prove that the money in the account represented proceeds. Though the government could proceed on a substitute asset theory, it could not proceed on a strict proceeds theory.

United States v. $999,830.00, 704 F.3d 1042 (9th Cir. 2012)

When a claimant alleges that he has an ownership interest in seized assets, this is sufficient to withstand a motion to dismiss on standing grounds. When a claimant alleges a possessory interest, the claimant the claimant must explain the circumstances of this possession.

United States v. Mahaffy, 693 F.3d 113 (2d Cir. 2012)

The definition of “proceeds” differs in a criminal forfeiture proceeding depending on whether the crime involved the sale of a lawful product in an unlawful manner, versus the sale of an unlawful product. 18 U.S.C. § 981(a)(2). In this case, the defendants were charged with selling securities with the improper use of confidential information. The Second Circuit concluded that this constituted the sale of a lawful product in an unlawful manner, which means that the forfeiture was limited to the profit, as opposed to gross proceeds.

United States v. $186,416.00, 590 F.3d 942 (9th Cir. 2010)

The search that resulted in the seizure of the money in this case was not lawful. The search was conducted pursuant to a state search warrant that alleged a violation of state law. There was, however, no law against medical marijuana in California, so there was no state law violation. The money was then transferred to the federal government for forfeiture. The illegal search, however, was illegal regardless of the venue in which the forfeiture case was tried and the evidence, including the fruits of the illegal search, could not be used in the federal forfeiture case.

United States v. Wright, 361 F.3d 288 (5th Cir. 2004)

The statute of limitations for filing a Rule 41(g) motion for return of seized property (alleging, for example, insufficient notice prior to forfeiture) is six years from the date the defendant was on reasonable notice about the forfeiture.

United States v. Vondette, 352 F.3d 772 (2d Cir. 2003)

The government may forfeit money in an IRA. ERISA does not bar a seizure of tainted money that the defendant places in an IRA.

United States v. $133,735.30 Seized from U.S.Bancorp Acct. No 32130630, 139 F.3d 729 (9th Cir. 1998)

After the government's forfeiture complaint was dismissed, the question was the rate of interest that the government would be required to pay on the funds that it had seized. The Ninth Circuit held that the interest actually earned on the seized funds, which had been deposited into an interest-bearing account, would be disgorged. The trial court had held that interest should be paid at the "prevailing government rate."

United States v. $515,060.42 in U.S. Currency, 152 F.3d 491 (6th Cir. 1998)

The statute of limitations for a forfeiture action is five years. 19 U.S.C. § 1621. The statute begins to run from the date the government discovers the criminal violation. Even if there is a continuing offense, the period of limitations runs after the government learns of the crime. The limitation also does not start when the asset is seized – it begins before that: when the discovery of the crime occurs. The court decides another question as well: When the government wrongfully seizes money, it must return the money with interest. The court analogized to the seizure of a pregnant cow. If the seizure was improper, the government would be required to return the cow and the calf. The government could not keep the calf. Even if the funds are not placed in an interest-bearing account, the court should calculate an appropriate interest rate.

United States v. Cunan, 156 F.3d 110 (1st Cir. 1998)

The doctrine of res judicata applies to bar a criminal forfeiture of property which was the subject of a prior civil forfeiture petition that was dismissed with prejudice. Though generally the disposition in a civil case does not generate a res judicata bar to subsequent criminal charges, in the forfeiture context, the proceedings satisfy the “identity” requirement of the doctrine of res judicata. Rather than dismissing the forfeiture case with prejudice, the government should have requested a stay.