United States of America v. Real Property Located at 6415 North Harrison Avenue, Fresno, Fresno County, California, APN: 407-751-08
Filing
19
MEMORANDUM DECISION AND ORDER Re: 12 Motion to Dismiss, signed by Judge Oliver W. Wanger on 6/27/2011. (Claimants motion to dismiss is DENIED, without prejudice.) (Gaumnitz, R)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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1:11-cv-00304-OWW-SKO
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UNITED STATES OF AMERICA,
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Plaintiff,
MEMORANDUM DECISION AND ORDER
RE: MOTION TO DISMISS (Doc.
12)
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v.
REAL PROPERTY LOCATED AT 6415
N. HARRISON AVE., FRESNO,
CALIFORNIA APN:407-751-08,
Defendant.
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I. INTRODUCTION.
On February 22, 2011, the United States filed a complaint for
forfeiture in rem against Real Property Located at 6415 N. Harrison
Avenue, Fresno, Fresno County, California.
(Doc. 1).
On May 2, 2011, claimants Bok Hee Ee and Judy Ee (“Claimants”)
filed a motion to dismiss.
opposition on May 27, 2011.
June 3, 2011.
(Doc. 12).
(Doc. 15).
The United States filed
Claimants filed a reply on
(Doc. 16).
II. FACTUAL BACKGROUND.
The defendant in this action is real property located at 6415
North Harrison Avenue, Fresno, Fresno County, California, APN:
407-751-08 (“the Property”), described as follows:
Lot 2 of Tract No. 3600, Craycroft Village, according to
the map thereof recorded in Volume 42, Page 1 of Plats,
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Fresno County Records. APN: 407-751-08
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The recorded owners of the Property are Bok Hee Ee (“Ee”), a widow,
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and her daughter Judy C. Ee, a single woman, as joint tenants.
Bok
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Hee Ee purchased the Property in 1993.
On or about January 23,
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2001, Bok Hee Ee opened a Home-Equity Line of Credit (“HELOC”) with
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Bank of the West secured by the equity value of the Property.
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Ee married Kwan Yong Choi (“Choi”) in October 2004.
The
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complaint alleges that an investigation conducted by Immigration
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and Customs Enforcement (“ICE”) from February 2009 to February 2010
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revealed that Ee and Choi used the HELOC to launder funds from
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fraudulent investment schemes perpetrated by Choi.
Choi was
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indicted on May 27, 2010 for money laundering in violation of 18
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U.S.C. §§ 1956 and 1957; Choi’s criminal case is pending.
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According to the complaint, Choi placed fraudulently obtained
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funds into a Bank of America business account number ***9021 (“9021
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Account”) and a personal Bank of America account number ***838
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(“838 Account”). Choi used funds from the 9021 Account and 838
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Account to fund checks deposited into the following accounts:
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a. Hanmi Bank account number ***753 dba Trinity
California Theological Seminary controlled by Choi;
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b. Bank of America account number *** 575 in the name of
Kwan Choi (hereafter “BoA575");
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c. Bank of the West account number ***286 in the name of
Bok Ee (hereafter “BoW286");
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d. Bank of the West account number ***166 in the name of
Bok Ee (hereafter “BoW166"); and,
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e. Bank of America account number ***159 in the name of
Bok Choi, the married name of Bok Ee (hereafter
“BoA159").
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Funds from these five accounts were used to service the HELOC.
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Funds from the HELOC were then placed back into Ee’s Bank of
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America ***159 and Bank of the West ***166 accounts.
III. LEGAL STANDARD.
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Motions to dismiss in rem forfeiture actions are governed by
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Federal
Rule
of
Civil
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Supplemental Rules for Admiralty or Maritime Claims and Asset
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Forfeiture Actions.
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Dismissal
under
Procedure
Rule
12(b)
12(b)(6)
is
and
Rule
appropriate
G
of
where
the
the
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complaint lacks sufficient facts to support a cognizable legal
10
theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th
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Cir.1990). To sufficiently state a claim to relief and survive a
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12(b) (6) motion, the pleading "does not need detailed factual
13
allegations" but the "[f]actual allegations must be enough to raise
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a right to relief above the speculative level." Bell Atl. Corp. v.
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Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
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Mere "labels and conclusions" or a "formulaic recitation of the
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elements of a cause of action will not do." Id. Rather, there must
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be "enough facts to state a claim to relief that is plausible on
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its face." Id. at 570. In other words, the "complaint must contain
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sufficient factual matter, accepted as true, to state a claim to
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relief that is plausible on its face." Ashcroft v. Iqbal, --- U.S.
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----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal
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quotation marks omitted).
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The Ninth Circuit has summarized the governing standard, in
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light of Twombly and Iqbal, as follows: "In sum, for a complaint to
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survive a motion to dismiss, the nonconclusory factual content, and
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reasonable
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suggestive of a claim entitling the plaintiff to relief." Moss v.
inferences
from
that
3
content,
must
be
plausibly
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U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) (internal
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quotation marks omitted). Apart from factual insufficiency, a
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complaint is also subject to dismissal under Rule 12(b)(6) where it
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lacks a cognizable legal theory, Balistreri, 901 F.2d at 699, or
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where the allegations on their face "show that relief is barred"
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for some legal reason, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct.
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910, 166 L.Ed.2d 798 (2007).
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In deciding whether to grant a motion to dismiss, the court
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must accept as true all "well-pleaded factual allegations" in the
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pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not,
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however, "required to accept as true allegations that are merely
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conclusory,
13
inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988
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(9th Cir.2001). "When ruling on a Rule 12(b)(6) motion to dismiss,
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if a district court considers evidence outside the pleadings, it
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must normally convert the 12(b)(6) motion into a Rule 56 motion for
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summary
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opportunity to respond."
United States v. Ritchie, 342 F.3d 903,
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907
court
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materials-documents
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incorporated by reference in the complaint, or matters of judicial
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notice-without converting the motion to dismiss into a motion for
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summary judgment." Id. at 908.
(9th
unwarranted
judgment,
and
Cir.2003).
"A
deductions
it
must
attached
of
give
may,
to
fact,
the
unreasonable
nonmoving
however,
the
or
party
consider
complaint,
an
certain
documents
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Pursuant to Rule G of the Supplemental Rules for Admiralty or
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Maritime Claims, a forfeiture complaint must "state sufficiently
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detailed facts to support a reasonable belief that the government
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will be able to meet its burden of proof at trial."
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Admiralty or Maritime Cl. and Asset Forfeiture Actions Rule E
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Supp. R. G for
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requires the complaint to "state the circumstances from which the
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claim arises with such particularity that the defendant or claimant
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will be able, without moving for a more definite statement, to
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commence an investigation of the facts and to frame a responsive
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pleading." Supp. R. E(2)(a) for Admiralty or Maritime Cl. and Asset
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Forfeiture Actions.
IV. DISCUSSION.
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A. Statute of Limitations
Claimants assert that the United States’ action is time
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barred.
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“commenced within five years after the time when the alleged
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offense was discovered.” United States v. 874 Gartel Drive, 79 F.3d
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918, 922 (9th Cir. 1996) (citing 19 U.S.C. § 1621).
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statutory period begins to accrue only upon discovery of the
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offense, not with the commission thereof.”
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Pursuant to 19 U.S.C. § 1621, a forfeiture action must be
According
to
the
complaint,
the
“The
Id.
money
laundering
scheme
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underlying the United States’ forfeiture action was not discovered
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until, at the earliest, February 2009, when the United States began
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its investigation into Choi and Bok Ee.
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complaint in this action was filed in 2011, within the five-year
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period proscribed by section 1621.
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(Compl. at 3).
The
Claimants invoke the one-year statute of limitations set forth
in 18 U.S.C. § 984(b).
Section 984 applies:
[i]n any forfeiture action in rem in which the subject
property is cash, monetary instruments in bearer form,
funds
deposited
in
an
account
in
a
financial
institution...or precious metals.
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18 U.S.C. § 984(a)(1). The United State’s complaint does not seek
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forfeiture
of
the
types
of
property
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identified
in
section
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984(a)(1);
the
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property.
By its own terms, section 984 does not apply to the
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instant action.
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of limitations for the United States’ forfeiture claim.
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B. Claimants’ Arguments Regarding Traceability
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Claimants
United
Id.
States
seeks
only
forfeiture
of
real
Section 1621 provides the applicable statute
contend
that
“to
forfeit
property
as
direct
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‘traceable proceeds’ the government literally has to trace the
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exact same identifiable assets from the tainting act into the res.”
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(Motion to Dismiss at 9).
Claimants cite no authority in support
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of their argument, which is contrary to Ninth Circuit law. Tracing
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of money for the purposes of section 981 does not require that the
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identical money be traced.
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in the Amount of $ 58,654.11, 122 F.3d 1263, 1264 (9th Cir. 1997).
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As the Second Circuit has explained:
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E.g., United States v. Check No. 25128
Where the credit in a depositor's account represents the
net results of transactions that include a deposit of
drug money, there is a plausible argument to be made
either that the account contains the "traceable proceeds"
of the tainted deposit (so long as the balance has not
fallen below the amount of the tainted deposit) or that
any withdrawal (in excess of the tainted deposit)
contains the "traceable proceeds" of such a deposit.
Which approach reflects reality in any particular case
will depend on the precise circumstances. For example, if
a depositor placed a $ 175 check from his automobile
insurer in payment of a damage claim into an account that
contained $ 100 from a drug sale and the next day paid a
$ 175 bill for car repairs, a fact-finder would be
entitled to conclude that the $ 175 withdrawal did not
contain "traceable proceeds" of the drug transaction but
solely the "traceable proceeds of the insurance payment,
with the tainted deposit remaining in the account.
Obviously few cases will present facts that neatly match
untainted deposits with withdrawals, and the real
question therefore becomes which side bears the risk of
the inevitable uncertainty that will arise in most cases.
Congress has answered that question in the Government's
favor by assigning it a lenient burden of proof in
obtaining forfeiture of "traceable proceeds" of drug
transactions.
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United States v. Banco Cafetero Panama, 797 F.2d 1154, 1159-1160
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(2nd Cir. 1986) superceded on other grounds by statute as stated in
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United States v. Contents in Account No. 059-644190-69, 253 F.
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Supp. 2d 789, 795 (D. Vermont 2003).
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The only case cited in Claimants’ motion concerning their
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traceability argument is United States v. All Funds Presently on
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Deposit at Am. Express Bank, 832 F. Supp. 542, 560 (E.D.N.Y 1993).
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The selective quotation from All Funds provided by Claimants,
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however, is from a passage in which the court was quoting a portion
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of the legislative history of section 984.
Not only is All Funds
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inapposite, it does not even stand for the proposition Claimants
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cite it for: that “when proceeds are commingled in a bank account
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with clean money, the trail of ‘directly traceable proceeds’ ends.”
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(Motion to Dismiss at 8).
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The complaint alleges facts sufficient to support a reasonable
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belief that the government will be able to meet its burden of proof
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at trial of establishing that the Property is derived, at least in
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part, from proceeds traceable to offenses identified in section
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981.
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1191, 1196 (9th Cir. 1999) (increased equity value of real property
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traceable to tainted funds subject to forfeiture); see also United
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States v. 216 Kenmore Ave., 657 F. Supp. 2d 1060, 1069 (D. Minn.
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2009)
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laundering activity where monies were used to pay property taxes
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and conduct
See, e.g., United States v. 3814 NW Thurman St., 164 F.3d
(holding
that
real
renovations).1
property
was
Claimants’
“traceable
motion
to
to”
money
dismiss
the
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There are potential problems with the government's tracing based claims, but
Claimants have not identified them. It does not appear that the entire property
is subject to forfeiture under the government's tracing-based claims; rather,
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Government’s tracing-based claims is DENIED, without prejudice.
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C. Claimants’ Arguments Concerning 981(a)(1)(A)
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Claimants contend that the Property was not “involved in” the
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alleged money laundering transactions within the meaning of section
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981(a)(1)(A).2
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Claimants aver that
the fact that the line of credit was secured was merely
incidental or fortuitous – it did not make the underlying
criminal offense “less difficult or more or less free
from obstruction or hindrance.” United States v.
Schifferli, 895 F.2d 987 (4th Cir. 1990).
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(Motion to Dismiss at 10).
In Schifferli, the Fourth Circuit
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adopted the facilitation approach to determining whether property
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was “involved in” criminal conduct.
See Schifferli, 895 F.2d at
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990.
Although section 981(a)(1)(A) does not contain the words
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“facilitate” or “facilitating,” numerous courts have concluded that
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only the equity value of the property traceable to tainted funds appears to be
subject to forfeiture. See, e.g., NW Thurman St., 164 F.3d at 1196 (holding that
increased equity value of real property traceable to tainted funds subject to
forfeiture). Several district courts have noted a distinction between forfeiture
claims against real property based on “traceability” and claims based on the
property’s actual involvement in money laundering. E.g., In re 650 Fifth Ave.
& Related Props., 2011 U.S. Dist. LEXIS 34295 *100-101 n. 11 (S.D.N.Y. 2011)
(noting distinction between 981(a)(1)(C) claims and 981(a)(1)(A) claims);United
States v. Real Prop. at 7401-7403 S. Racine, 2010 U.S. Dist. LEXIS 31465 *24
(N.D. Ill. 2010) (same).
Unlike the government’s claim under section
981(a)(1)(A), the government’s tracing-based claim may not apply to the entire
value of the property, but rather only to the portion of the equity value
traceable to laundered funds. This issue has not been briefed. Ultimately, it
appears seems the government’s tracing claims are redundant an unnecessary in
light of the government’s section 981(a)(1)(A) claim. Tracing is unnecessary to
the extent that the property was “involved in” laundering.
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Claimants also invoke the “substantial connection” requirement set forth in 18
U.S.C. § 983(c)(3). Section 983(c)(3) sets forth the applicable burden of proof
in cases where the government’s theory is that property was involved in the
commission of an offense. The government need not satisfy its burden of proof
at the pleading phase, however.
See, e.g., United States v. $ 11,500.00 in
United States Currency, 2010 U.S. Dist. LEXIS 76868 (D. Oregon 2010)
(distinguishing pleading burden from burden at trial under section 983). As
discussed above, the United State’s has satisfied its pleading burden by alleging
facts sufficient to support a reasonable belief that the Property was involved
in money laundering.
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the
2
facilitate an offense.
3
Account No. 90-3617-3, 754 F. Supp. 1467, 1473 (D. Hawaii 1991);
4
see also In re 650 Fifth Ave. & Related Props., 2011 U.S. Dist.
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LEXIS 34295 *92-94 (S.D.N.Y. 2011) (collecting cases).3
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phrase
"property
involved
in"
includes
property
used
to
E.g., United States v. All Monies In
Property need not be indispensable to the commission of an
7
offense in order to be “involved in” the offense.
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United States v. 3639-2nd St., N.E., 869 F.2d 1093, 1096 (8th Cir.
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1989).
10
See, e.g.,
As the district court explained in All Monies In Account
No. 90-3617-3:
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Facilitating property is forfeitable if it makes the
underlying criminal activity less difficult or "more or
less free from obstruction or hindrance." There must be
more than an incidental or fortuitous connection between
the property and the illegal activity, but the property
need not be indispensable to the commission of the
offense. Nor does the property need to be used
exclusively for illegal activity.
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754 F. Supp. at 1473 (citations omitted).
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Several courts have held that real property is “involved in”
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a money laundering offense if laundered funds are used to make
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payments
toward
purchase
of
the
property
and
to
pay
for
19
improvements.
See In re 650 Fifth Ave, 2011 U.S. Dist. LEXIS 34295
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at * 99 (citing United States v. Myers, 21 F.3d 826, 831 (8th Cir.
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3
Claimants attempt to distinguish In re 650 on the basis that, in that case,
“the real property being forfeited there was itself the alleged vehicle
generating the income from specified unlawful activity.” (Reply at 6). However,
the distinction Claimants raise is actually harmful to their position. In re 650
held “here...[t]he Building was merely the source of the money laundered; it was
not involved in the laundering itself. The Building as a whole therefore cannot
be forfeited as having been ‘involved in’ money laundering.” Id. (emphasis
added). The basis for the holding in In re 650 was not that the building was the
source of the tainted money; rather, the court held that the building was subject
to forfeiture because tainted money was used to maintain the building. Id. at
*100. Here, the complaint alleges that tainted money was used to increase the
equity value of the Property and that the Property itself was used to facilitate
money laundering.
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1994); United States v. 10.10 Acres Located on Squires Road, 386 F.
2
Supp. 2d 613, 616 (D.N.C. 2005); United States v. Schlesinger, 261
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Fed. Appx. 355, 36 (2nd Cir. 2008); and United States v. 216
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Kenmore Ave., 657 F. Supp. 2d 1060, 1069 (D. Minn. 2009) (tracing
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theory)).
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fraudulent scheme into the business operating accounts of companies
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he ran at the premises and then used funds from the operating
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accounts to pay the companies' monthly lease and tax expenses.
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261 Fed. Appx. At 361.
In Schlesinger, a defendant deposited the proceeds of a
The Second Circuit affirmed the district
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court’s finding that the premises “served as a conduit for the
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proceeds of illegal transactions,” making the premises subject to
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forfeiture.
Id.
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a
forfeitable
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activity” where a defendant made substantial payments on a real
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estate contract for the farm and paid for improvements on the farm
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with laundered funds.
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farm
was
Similarly, in Myers, the Eight Circuit held that
because
it
was “involved
in
criminal
Here, the complaint alleges sufficient facts to support a
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forfeiture claim under the theory that Property was the conduit
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through which a money laundering scheme was carried out.
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the Property, Choi and Ee would not have had access to the ELOC,
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which facilitated numerous transfers of substantial amounts of
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money to and from accounts involved in the money laundering scheme
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alleged in the complaint. It cannot be disputed that the Property,
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through the ELOC, made the alleged money laundering scheme less
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difficult because it provided access to an apparently legitimate
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source of funds.
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Property is of no avail; absent the Property, the $70,000.00
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equity line of credit would not have been available, and there
Absent
Claimants’ attempt to separate the ELOC from the
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1
would have been no source of apparently legitimate funds to deposit
2
into the various accounts held by Ee and Choi.
3
Contrary to Claimants’ repeated contention, the United State’s
4
forfeiture claim under section 981(a)(1)(A) does not rely on the
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“expanding drop of ink theory;” accordingly, Claimants citation to
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United States v. $3,148,884.40 (Bital), 76 F.Supp.2d 1063, 1067
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(C.D. Cal. 1999) for the proposition that “the ‘expanding drop of
8
ink’ or ‘facilitating bank account’” is no longer viable is of no
9
avail. (Motion to Dismiss at 11).
The United States claim under
10
section 981(a)(1)(A) is based on the contention that the Property
11
was used to facilitate money laundering, not that the Property is
12
subject to forfeiture because its equity value was paid for in part
13
by tainted funds (this theory is the basis of the United States
14
claims under section 981(a)(1)(C) and 981(a)(1)(D)).
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motion to dismiss is DENIED, without prejudice.
ORDER
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Claimants’
For the reasons stated, Claimants’ motion to dismiss is
DENIED, without prejudice.
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IT IS SO ORDERED.
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Dated:
hkh80h
June 27, 2011
/s/ Oliver W. Wanger
UNITED STATES DISTRICT JUDGE
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