United States of America v. Approximately $38,474.56 seized from United Security Bank account number 10101476
Filing
12
FINDINGS and RECOMMENDATIONS Regarding Plaintiff's 9 Ex Parte Application for Default Judgment signed by Magistrate Judge Gary S. Austin on 12/4/2012. Objections to F&R's due within fourteen (14) days of service of this recommendation.(Martinez, A)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
EASTERN DISTRICT OF CALIFORNIA
10
UNITED STATES OF AMERICA,
11
12
13
14
15
16
17
18
)
)
Plaintiff,
)
)
v.
)
)
APPROXIMATELY $38,474.56 SEIZED
)
FROM UNITED SECURITY BANK
)
ACCOUNT NUMBER 10101476, HELD IN )
THE NAME OF ETHELE M. BARRON, dba )
EB PREFERRED PROPERTY
)
MANAGEMENT REAL ESTATE
)
BROKERS TRUST,
)
)
Defendant.
)
_____________________________________ )
1:12-cv-01271 LJO GSA
FINDINGS AND RECOMMENDATIONS
REGARDING PLAINTIFF’S EX PARTE
APPLICATION FOR DEFAULT
JUDGMENT
(Document 9)
19
20
INTRODUCTION
21
In this civil forfeiture action, Plaintiff United States of America (“Government”) seeks:
22
1.
Default judgment against the interests of Ethele M. Barron and EB Preferred
23
Property Management Real Estate Brokers Trust in approximately $38,474.56
24
(“Defendant Property”); and
25
2.
Entry of a final forfeiture judgment to vest in the Government all right, title and
26
interest in the Defendant Property.
27
28
1
1
This Court considered the Government’s application for default and final forfeiture
2
judgment on the record and without oral argument on the now vacated November 30, 2012
3
hearing date, pursuant to this Court’s Local Rules 230(g) and 540(d). For the reasons discussed
4
below, this Court RECOMMENDS to:
5
1.
GRANT the Government default judgment and ENTER final forfeiture judgment
6
to vest in the Government all right, title and interest in the Defendant Property;
7
and
8
2.
9
ORDER the Government, within ten (10) days of service of an order adopting
these findings and recommendations, to submit a proposed default and final
10
forfeiture judgment consistent with these findings and recommendations.
11
FACTUAL BACKGROUND1
12
This is a civil forfeiture action against approximately $38,474.56 seized
from United Security Bank account number 10101476, held in the name of Ethele
M. Barron dba EB Preferred Property Management Real Estate Brokers Trust
(hereafter "defendant funds"). The defendant funds were seized on March 14,
2014 [sic: 2012], at United Security Bank located at 3404 Coffee Road,
Bakersfield, California. (See Verified Complaint for Forfeiture In Rem filed
August 3, 2012, hereafter "Complaint," or Court Docket (“CD”) #1 at ¶¶ 1 and 2.)
The facts giving rise to this action are set out in detail in the Complaint.
As stated, in a four month period, between September 12, 2011, and January 6,
2012, Ethele M. Barron (hereafter “Barron”) structured transactions by breaking
up currency deposits to evade the currency transaction reporting requirement. CD
#1 at ¶ 6. In that four month period between September 12, 2011, and January 6,
2012, at least $300,383.00 in currency was structured into United Security Bank
account number 10101476, and at least $26,300.00 in currency was structured into
United Security Bank account number 101009761. Id.
Pursuant to 31 U.S.C. §§ 5313 and 5324, and regulations there under,
including 31 C.F.R. §§ 1010.300 and 1020.310 (formerly 31 C.F.R. §§ 103.22,
103.27 and 103.28), domestic financial institutions are required to prepare and
submit Currency Transaction Reports (CTRs) to report cash transactions
involving over $10,000 in currency, every time they occur at the bank, whether in
one transaction or aggregated. CD #1 at ¶ 7. It is the financial institution that is
required to prepare and submit the CTR. Id. In order to complete the CTR form,
the financial institution is required to verify and record the name and address of
the person conducting the transaction, and the identity, account number, and the
Social Security Number or taxpayer identification number, if any, of any person
for whom a transaction is to affect. Id. This verification must be made with an
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1
The facts are quoted directly from the Government’s application at pages 2 through 5 and include specific
references to the allegations as more fully set forth in the verified complaint. Footnotes omitted.
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
identity document, such as a driver's license or passport. Id. These CTR rules
apply to the deposit, withdrawal, exchange of currency, or other payment or
transfer, by, through, or to such financial intuitions, which involves a transaction
in currency of more than $10,000. Id.
It is a felony under 31 U.S.C. § 5324(a)(1) to cause or attempt to cause a
financial institution to fail to file a CTR. CD #1 at ¶ 8. This provision
encompasses multiple transactions occurring at the same financial institution, or
different branches of the same financial institution, on the same or consecutive
business days, by or on behalf of any person. In the case of multiple transactions
in one day which aggregate above the $10,000 CTR threshold, the multiple
transactions are treated as one transaction under 31 C.F.R. § 1010.313(b)
(formerly 31 C.F.R. § 103.22(c)(2)), thereby triggering the bank's obligation to
file a CTR. Id. It is a felony under 31 U.S.C. § 5324(a)(3) to structure or assist in
structuring, or attempt to structure or assist in structuring, any currency
transaction with one or more domestic financial institutions in an amount below
the $10,000.01 currency transaction reporting (CTR) threshold. CD #1 at ¶ 9.
Pursuant to 31 U.S.C. § 5324(a)(1), the transaction must take place with a
"domestic financial institution." CD #1 at ¶ 10. A financial institution is defined
under 31 U.S.C. § 5312(a)(2)(A) an insured bank (as defined in 12 U.S.C. §
1813(h) of the Federal Deposit Insurance Act (FDIC)). Id. United Security Bank
is a domestic bank insured by the FDIC and qualifies as a domestic financial
institution. Id. According to United Security Bank records, account number
10101476 is a business checking account in the name of Ethele M. Barron dba EB
Preferred Property Management Real Estate Brokers Trust opened on July 27,
2010. CD #1 at ¶ 11.
According to United Security Bank records, account number 10100976 is
a business checking account in the name of Ethele M. Barron dba EB Preferred
Property Management Real Estate Brokers Trust opened on September 7, 2011.
CD #1 at ¶ 12.
A review of banking records demonstrates at least 42 cash deposits
totaling $326,683.00 were structured into United Security Bank account numbers
10101476 and 10100976 in the four-month period between September 12, 2011
through January 6, 2012. CD #1 at ¶ 13. All of these deposits were transactions in
amounts under the CTR threshold of $10,000.01. Id. What is remarkable about
the pattern of cash deposits is that all of the cash deposits are made below
$10,000.01. CD #1 at ¶ 14. Secondly, of the 42 structured cash deposits made, 23
were between $9,000.00 and $10,000.00. Id. Third, on five different business
days there were multiple same-day cash deposits made. Id. For example, on
November 4, 2011, a cash deposit was made into United Security Bank account
10101476 for $9,500 and a cash deposit was made into United Security Bank
account 10100976 for $1,500. Id. Similarly, on November 10, 2011; November
15, 2011; December 2, 2011; December 14, 2011; and December 30, 2011; two
cash deposits were made on the same day into United Security Bank accounts
10101476 and 10100976. Id. In each incident, the individual deposit was less
than $10,000.01, however the sum of both cash deposits equaled to more than
$10,000.01. Id.
United Security Bank tellers were interviewed and reported that all of the
deposits were brought in by Barron. CD #1 at ¶ 15. The cash deposits were made
by Barron at the United Security Bank branch located at 523 Cascade Place, Taft,
California 93268 (Branch #11); the cash deposits would be bundled with a bank
strap in one hundred dollar and twenty dollar denominations, never greater than
$10,000.00. Id. The currency would be kept in a bank bag that was provided to
27
28
3
1
2
3
4
5
6
7
8
9
10
11
Barron by United Security Bank. Id. Barron explained the cash was collected
from subjects who paid her rent for rental properties which she managed. Id.
Prior banking activity at JP Morgan Chase (Barron’s former banking
institution) was reviewed, which confirmed that similar cash structuring activity
had been conducted by Barron [at] JP Morgan Chase Bank between December
2009 to August 2011. CD #1 at ¶ 16. A representative of JP Morgan Chase was
contacted who advised that a letter was addressed and mailed to Barron on
February 2, 2010, warning her regarding her deposit behavior and informing her
that structuring was illegal. Id.
Of the total amount of $109,123.90 actually seized from United Security
Bank accounts 10101476 and 10100976, approximately $70,649.34 was returned
based on claims submitted to the Internal Revenue Service during the
administrative forfeiture process, based on documentation submitted by clients of
Barron’s evidencing rental income owed. CD #1 at ¶ 17. As a result, the instant
civil in rem action involves only the $38,474.56 claimed by Ethele Barron
personally, who claimed that the sum represented three month’s profit (i.e.: her
commission/management fee) from her property management company. Id.
Based on the allegations set forth in the Complaint, on August 6, 2012, the
Clerk of the Court issued a Warrant for Arrest of Articles In Rem for the
defendant funds. The Warrant for Arrest was executed on the defendant funds on
August 23, 2012. See Process Receipt and Return filed September 18, 2012, CD
#5.
12
13
The Government’s Claims
14
On August 3, 2012, the Government filed its Complaint for forfeiture in rem to claim:
15
(1) that the Defendant Property is subject to forfeiture to the Government under Title 18 of the
16
United States Code section 981(a)(1)(A) and Title 31 of the United States Code section 5317, on
17
the grounds that the funds were the proceeds of, or constitute property involved in, violations of
18
Title 31 of the United States Code section 5324, or any conspiracy to commit any such
19
violations, or are traceable to any such violations or conspiracy. (Doc. 1.)
20
On August 6, 2012, based upon the allegations set forth in the Complaint, the Clerk of the
21
Court issued a Warrant for Arrest of Articles In Rem for the Defendant Property. (Doc. 3.) The
22
warrant was executed on August 23, 2012. (See Doc. 5.)
23
Notice of Forfeiture Action
24
On September 13, 2012, the Government filed its Declaration of Publication, wherein it
25
declared it had published notice for thirty consecutive days between August 8, 2012 and
26
September 6, 2012. (Doc. 4; see also Doc. 9 at 5.)
27
28
4
1
2
1.
Ethele M. Barron
On August 13, 2012, Ethele M. Barron was served with copies of the Verified Complaint
3
for Forfeiture In Rem, Warrant for Arrest of Articles In Rem, Order Setting Mandatory
4
Scheduling Conference, Standing Order, Notice of Availability of Voluntary Dispute Resolution,
5
Notice of Availability of a Magistrate Judge, and notice of forfeiture letter dated August 13,
6
2012, by certified mail no. 7006-2760-0000-0500-6443. The certified return receipt card was
7
signed on August 15, 2012, by Ethele Barron. (Doc. 9 at 5-6.)
8
9
On August 13, 2012, copies of the above-listed documents were served by certified mail
no. 7006-2760-0000-0500-6429 to attorney Brian C. Harpst, who filed the administrative
10
forfeiture claim on behalf of Ethele M. Barron. The certified mail receipt was signed by Trevor
11
and received in the United States Attorney’s Office on August 17, 2012. (Doc. 9 at 6.)
12
13
2.
EB Preferred Property Management Real Estate Brokers Trust
On August 13, 2012, EB Preferred Property Management Real Estate Brokers Trust, in
14
care of Ethele M. Barron, was served with copies of the above-listed documents by certified mail
15
no. 7006-2760-0000-0500-6436. The certified return receipt card was signed by Ethele Barron on
16
August 15, 2012. (Doc. 9 at 6.)
17
On September 14, 2012, attorney Brian Harpst contacted the United States Attorney’s
18
Office regarding the filing of a claim; specifically, if the claim must be filed electronically with
19
the Eastern District of California District Court, whether an original verified claim must be
20
provided to the United States Attorney’s Office, and whether there was any further information
21
required in the claim. Mr. Harpst was informed by the Government that a verified claim must be
22
filed electronically with the Eastern District of California District Court and that an original
23
verified claim must be received in the United States Attorney’s Office. During this phone call,
24
the Government asserts Mr. Harpst did not request an extension of time within which to file a
25
claim. (Doc. 9 at 6.)
26
27
28
5
1
The United States has not since received any further communication from attorney Harpst
2
nor has there been a verified claim filed on behalf of Ethele M. Barron or EB Preferred Property
3
Management Real Estate Brokers Trust. (Doc. 9 at 7.) Neither have Ethele M. Barron or EB
4
Preferred Property Management Real Estate Brokers Trust filed an answer to the complaint in
5
this action.
6
Default Entries
7
At the Government’s request, the Clerk of the Court entered defaults in this action as to
8
Ethele M. Barron and EB Preferred Property Management Real Estate Brokers Trust on
9
September 21, 2012. (Docs. 6-7.)
10
Sufficiency of the Complaint
11
The Government contends that the allegations set forth in the Verified Complaint for
12
Forfeiture In Rem and the facts cited "provide ample grounds" for forfeiture of the Defendant
13
Property. (Doc. 9 at 7-8.)
14
A complaint’s sufficiency is a factor to consider when deciding whether to grant default
15
judgment. Eitel v. McCool, 782 F.2d 1470, 1471-1472 (9th Cir. 1986). Title 18 of the United
16
States Code section 981(a)(1)(A) provides for the forfeiture of “[a]ny property, real or personal,
17
involved in a transaction or attempted transaction in violation of section 1956, 1957 or 1960 of
18
this title, or any property traceable to such property.”
19
In its Verified Complaint, the Government alleges that the Defendant Property or funds
20
are proceeds of, or constitute property involved in, violations of Title 31 of the United States
21
Code section 5324, or any conspiracy to commit any such violations, or are traceable to any such
22
violations or conspiracy, and is therefore subject to forfeiture. (Doc. 1.) As referenced above
23
and set forth in the Verified Complaint, subsequent to the seizure of the defendant funds, Ethele
24
M. Barron was warned by JP Morgan Chase Bank on February 2, 2012 that her structuring
25
activity was illegal, but her structuring activity continued with her opening of the accounts at
26
United Security Bank. (Doc. 9 at 7.)
27
28
6
1
The complaint meets the requirements of Supplemental Rule G. It is verified, states the
2
grounds for subject matter jurisdiction, in rem jurisdiction, and venue, describes the property
3
seized and the circumstances surrounding the seizure, and identifies the relevant statutes. (See
4
Doc. 1.) In the absence of assertion of interests in the Defendant Property, this Court is not in a
5
position to question the facts supporting the forfeiture of the Defendant Property. The facts as
6
alleged provide a sufficient connection between the Defendant Property and illegal structuring
7
activity sufficient to support the forfeiture.
8
Notice Requirements
9
The Government contends that it provided required notice for the forfeiture of the
10
Defendant Property. The Fifth Amendment’s Due Process Clause prohibits the Government
11
from deprivation of property without “due process of law.” Individuals whose property interests
12
are at stake are entitled to “notice and an opportunity to be heard.” United States v. James Daniel
13
Good Real Property, 510 U.S. 43, 48, 114 S. Ct. 492 (1993).
14
1.
15
Notice by Publication
Supplemental Rule G(4) sets forth the rules for publication of the notice of action in
16
federal forfeiture proceedings. Rule G(4)(a)(iv)(C) provides that in lieu of newspaper
17
publication, the Government may publish notice “by posting notice on an official internet
18
government forfeiture site for at least 30 consecutive days.” Local Admiralty and In Rem rules
19
further provide that the Court shall designate by order the appropriate newspaper or other vehicle
20
for publication. See Local Rules 171 & 530.
21
Here, the Government accomplished such notice with publication by way of the official
22
internet government forfeiture site www.forfeiture.gov for a period of at least thirty (30) days.
23
More particularly, notice by publication occurred between the period of August 8, 2012 and
24
September 6, 2012. (See Doc. 4; see also Doc. 9 at 10.)
25
//
26
//
27
28
7
1
2
2.
Notice to Known Potential Claimants
When the Government knows of an owner of defendant property, the owner has a
3
constitutional right of due process to require "the Government to make a greater effort to give
4
him notice than otherwise would be mandated by [publication]." United States v. Real Property,
5
135 F.3d 1312, 1315 (9th Cir. 1998). For such persons, the Government must attempt to provide
6
actual notice by means "‘reasonably calculated under all circumstances' to apprise [the person] of
7
the pendency of the cash forfeiture." Dusenberry v. United States, 534 U.S. 161, 168, 122 S. Ct.
8
694 (2002). The Government must provide such notice "as one desirous of actually informing
9
the absentee might reasonably adopt to accomplish it." Mullane v. Central Hanover Bank &
10
Trust Co., 339 U.S. 306, 315, 70 S. Ct. 652 (1950). "Reasonable notice, however, requires only
11
that the government attempt to provide actual notice; it does not require that the government
12
demonstrate that it was successful in providing actual notice." Mesa Valderrama v. United
13
States, 417 F.3d 1189, 1197 (11th Cir. 2005).
14
Supplemental Rule G(4)(b) mirrors this requirement, providing for notice to be "sent by
15
means reasonably calculated to reach the potential claimant." Additionally, this Court's Local
16
Rule 540 addresses notice to persons known to have an interest in property subject to forfeiture.
17
The rule requires that a party seeking default judgment in an action in rem to show to the Court's
18
satisfaction that due notice and arrest of the property has been given by: (1) publication; (2) by
19
personal service on the person having custody of the property; (3) if the property is in the hands
20
of a law enforcement officer, by personal service on the person having custody prior to its
21
possession by law enforcement agency or officer; and (4) by personal service or certified mail,
22
return receipt requested, to every other person who has not appeared in the action and is known
23
to have an interest in the property; provided that failure to give actual notice to such other person
24
may be excused upon a satisfactory showing of diligent efforts to give such notice without
25
success. Local Rule 540(a).
26
27
28
8
1
Notwithstanding the Supplemental Rules and Local Rule 540(a), the Government
2
provides sufficient notice if such notice complies with Federal Rule of Civil Procedure Rule 4
3
requirements. See Fed. R. Civ. P. 4(n)(1) (when a federal statute authorizes forfeiture, "[n]otice
4
to claimants of the property shall then be sent in the manner provided by statute or by service of a
5
summons under this rule").
6
Here, as noted previously, the Government completed service by publication and by
7
certified mail of the complaint, arrest warrant, notice of forfeiture letter and other papers
8
regarding this action upon both Ethele M. Barron and EB Preferred Property Management Real
9
Estate Brokers Trust. Additionally, notice was provided by certified mail to Brian C. Harpst, an
10
attorney who filed the administrative forfeiture claim on behalf of Ethele M. Barron. In sum, no
11
notice issues arise as to the Defendant Property’s forfeiture.
12
Failure to File Claim or Answer
13
The Government contends that this Court’s clerk properly entered defaults against Ethele
14
M. Barron and EB Preferred Property Management Real Estate Brokers Trust. (Doc. 9 at 13.)
15
Supplemental Rule G(5) addresses responsive pleadings in civil forfeiture actions such as this
16
and requires a person who asserts an interest in or right against the subject property to file a claim
17
in this Court within thirty-five (35) days after the date of service of the Government’s complaint
18
or thirty (30) days after final publication of newspaper notice. Failure to comply with procedural
19
requirements for opposing the forfeiture precludes a person from establishing standing as a party
20
to a forfeiture action. United States v. Real Property, 135 F.3d at 1317.
21
As outlined above, more than thirty (30) days have passed since final publication
22
occurred, to wit: September 6, 2012. (Doc. 4.) Thus, the Clerk of the Court properly entered
23
defaults upon failure of the potential claimants to respond to the Government’s complaint and
24
notices. (Doc. 7.)
25
//
26
//
27
28
9
1
Default Judgment
2
The Government seeks judgment against the interests of Ethele M. Barron and EB
3
Preferred Property Management Real Estate Brokers Trust, and final forfeiture judgment to vest
4
in the Government all right, title and interest in the Defendant Property. The Supplemental Rules
5
do not provide a procedure to seek default judgment of an action in rem. Supplemental Rule A
6
provides: “The Federal Rules of Civil Procedure also apply to the foregoing proceedings except
7
to the extent that they are inconsistent with these Supplemental Rules.”
8
Pursuant to the Federal Rules of Civil Procedure, default entry is a prerequisite to default
9
judgment. Rule 55(a) of the Federal Rules of Civil Procedure governs entry of default: “When a
10
party against whom a judgment for affirmative relief is sought has failed to plead or otherwise
11
defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party’s
12
default.” Generally, the default entered by the clerk establishes a defendant’s liability:
13
14
Rule 55 gives the court considerable leeway as to what it may require as a
prerequisite to the entry of a default judgment. The general rule of law is that upon
default the factual allegations of the complaint, except those relating to the
amount of damages, will be taken as true.
15
16
Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987) (internal citations
17
& quotation marks omitted).
18
As noted above, the Government properly obtained default entries against the interests of
19
Ethele M. Barron and EB Preferred Property Management Real Estate Brokers Trust. There is no
20
impediment to default judgment sought by the Government as to them. The Government
21
properly seeks judgment against the interests of the entire world, that is, a final forfeiture
22
judgment to vest in the Government all right, title and interest in the Defendant Property or
23
currency. “A judgment in rem affects the interests of all persons in designated property. . ..
24
[T]he plaintiff is seeking to secure a pre-existing claim in the subject property and to extinguish
25
or establish the nonexistence of similar interests of particular persons.” Hanson v. Denckla, 357
26
U.S. 235, 246, n.12, 78 S. Ct. 1228 (1958).
27
28
10
1
In light of the defaults, a final forfeiture judgment is in order for the Government.
2
RECOMMENDATIONS AND ORDER
3
For the reasons discussed above, this Court RECOMMENDS to:
4
1.
GRANT Plaintiff United States of America default judgment against the interests
5
of Ethele M. Barron and EB Preferred Property Management Real Estate Brokers
6
Trust in the Defendant Property;
7
2.
8
9
ENTER final forfeiture judgment to vest in Plaintiff United States of America all
right, title and interest in the Defendant Property; and
3.
ORDER Plaintiff United States of America, within ten (10) days of service of an
10
order adopting the findings and recommendations, to submit a proposed default
11
and final forfeiture judgment consistent with the findings and recommendations
12
and order adopting them.
13
These findings and recommendations are submitted to the district judge assigned to this
14
action, pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local
15
Rule 304. Within fourteen (14) days of service of this recommendation, any party may file
16
written objections to these findings and recommendations with the Court and serve a copy on all
17
parties. Such a document should be captioned “Objections to Magistrate Judge’s Findings and
18
Recommendations.” The district judge will review the magistrate judge’s findings and
19
recommendations pursuant to Title 28 of the United States Code section 636(b)(1)(C). The
20
parties are advised that failure to file objections within the specified time may waive the right to
21
appeal the district judge’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).
22
23
24
IT IS SO ORDERED.
Dated:
6i0kij
December 4, 2012
/s/ Gary S. Austin
UNITED STATES MAGISTRATE JUDGE
25
26
27
28
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?