UNITED STATES OF AMERICA v. $263,327.95, INCLUDING BUT NOT LIMITED TO: et al

Filing 10

OPINION. Signed by Judge William J. Martini on 3/27/13. (gh, )

FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 2:12-cv-01914 (WJM)

UNITED STATES OF AMERICA,
Plaintiff,

OPINION
v.
$263,327.95, et al.,
Defendants in rem.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff United States of America (the “Government”) brings this civil forfeiture
action to forfeit and condemn a total of $263,327.95. This matter comes before the Court
on a motion to dismiss filed by Claimant Steve N. Chan (“Chan”). There was no oral
argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, the motion to dismiss is
DENIED.
I.

BACKGROUND

This is a civil forfeiture action in which the Government seeks to forfeit
$263,327.95. The Government alleges that this was the remaining balance of over
$658,000.00 that was structured into three separate bank accounts in violation of 31
U.S.C. § 5324(a).
Under federal law, U.S. financial institutions are required to file a currency
transaction report (“CTR”) for each deposit, withdrawal, or exchange of currency of more
than $10,000. See 31 U.S.C. § 5313(a) (2012). 31 U.S.C. § 5324(a) prohibits people
from structuring their transactions to avoid the $10,000 reporting requirement. That
statute provides that:
No person shall, for the purpose of evading the reporting
requirements of section 5313(a) . . . structure or assist in
structuring, or attempt to structure or assist in structuring, any
transaction with one or more domestic financial institutions.

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31 U.S.C. § 5324(a)(3). Pursuant to 31 U.S.C. § 5317(c)(2), “[a]ny property involved in
a violation of section 5313 . . . and any property traceable to any such violation or
conspiracy, may be seized and forfeited to the United States.”
The Complaint alleges that the Internal Revenue Service, Criminal Investigation
(“IRS-CI”) conducted an investigation of bank accounts held “in the name and/or for the
benefit of Steve Chan.” Compl. ¶ 2, ECF No. 1. The Complaint alleges that “Chan
maintains the following bank accounts”: (1) a “Sovereign Bank personal checking
account . . . in the name of Steven N. Chan”; (2) a “TD Bank, N.A. personal checking
account . . . in the name of Steve Chan”; (3) a TD Bank, N.A. “personal savings account .
. . in the name of Steve Chan”; and (4) a “Merrill Lynch Brokerage account . . . in the
name of Steve N. Chan.” Compl. ¶ 11. The Complaint also alleges that “Steven Chan
and Lieng Kang Kay maintain [a] Bank of America, N.A. personal checking account.”
Compl. ¶ 8. The Complaint alleges that, between July 16, 2010 and July 12, 2011, Chan
deposited a total of $658,277.08 in U.S. currency without making a single deposit over
the $10,000 CTR threshold. Compl. ¶ 19; see also Gov.’s Opp. Br. at 9-10. Attached to
the Complaint is a set of three spreadsheets labeled “Steve Chan . . . TD Bank, N.A.”;
“Steven N. Chan . . . Sovereign Bank”; and “Steven N Chan and Lieng Kang Kay . . .
Bank of America, N.A.” Compl. Attachment A, ECF No. 1. The spreadsheets list a total
of 96 transactions taking place across Chan’s various bank accounts. See id.
The Complaint and the attached spreadsheets provide information about numerous
individual transactions. For example, on January 21, 2011, Chan made a $6,000 deposit
at Bank of America, a $6,000 deposit at TD Bank, and a $6,000 deposit at Sovereign
Bank. Compl. Attachment A. On March 1, 2011, Chan made an $8,000 deposit at TD
Bank. Id. On March 1, 2011, Chan also made two separate deposits at Sovereign Bank,
one for $9,700 and another for $8,990. Id. On March 3, 2011, Chan made a $9,000
deposit at TD Bank and an $8,000 deposit at Sovereign Bank. Id. On March 11, 2011,
Chan deposited $8,000 at Bank of America and $8,900 at TD Bank. Id. On March 11,
2011, Chan also made two separate deposits at Sovereign Bank, one for $8,300 and one
for $9,000. Id. On May 6, 2011, Chan purchased a TD Bank official check in the
amount of $165,000, which was issued to Knights Abstract, Inc. for the purchase of real
property located in Philadelphia, Pennsylvania. Compl. ¶ 15. Chan also used $194,500
from his Bank of America account to purchase another piece of real property in
Philadelphia. Compl. ¶ 18.
On September 15, 2011, seizure warrants were executed by the Honorable
Michael A. Shipp. Compl. ¶ 20. On September 19, 2011, IRS-CI executed the seizure
warrants and seized $19,585.95 in Chan’s TD Bank account, $17,742.00 in Chan’s
Sovereign Bank account, and $226,000.00 in Chan’s Merrill Lynch account.1 Compl. ¶
21. On March 30, 2012, the Government filed its Complaint in this action. See ECF No.
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A large portion of the funds were not seized because they had already been used to purchase the
two pieces of real property described above.
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1. On April 20, 2012, the Government filed a Notice of Forfeiture, stating that any
claims to the property “must be filed by May 25, 2012.” Notice of Forfeiture at 2-3
(“Notice”), ECF No. 3. On May 25, 2012, Chan filed a Verified Claim of Interest (the
“Claim”). See Claim of Ownership by Steve N. Chan (“Claim”), ECF No. 4. The Claim
states, “I, Steve N. Chan, claimant, am the sole owner of the defendant in rem[,] i.e., [the]
$263,327.95 in currency at issue in the above-captioned action.” Id. ¶ 1. Chan now
moves to dismiss the Complaint.
II.

LEGAL STANDARD

Civil asset forfeiture proceedings are governed by two sets of procedural rules:
the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions
(“Supplemental Rules”) and the Federal Rules of Civil Procedure (“Civil Rules”). United
States v. $8,221,877.16 in U.S. Currency, 330 F.3d 141, 149 (3d Cir. 2003). “The
balance between the two is struck in favor of the Supplemental Rules, which always
apply to civil forfeiture proceedings.” Id. (citing 18 U.S.C. § 983(a)(3)). The Civil Rules
also apply to in rem proceedings, but only to the extent that they are not “inconsistent
with” the Supplemental Rules. Fed. R. Civ. Proc. Supp. A(2).
Under the Supplemental Rules, a person who asserts an interest in the defendant
property may intervene in the action as a claimant. Fed. R. Civ. Proc. Supp. G(5)(a)(i).
“A claimant who establishes standing to contest forfeiture may move to dismiss the
action under [Civil] Rule 12(b).” Fed. R. Civ. Proc. Supp. G(8)(b)(i). However, the
“sufficiency of the complaint is governed by [Supplemental] Rule G(2),” not by the Civil
Rule 12(b) plausibility standard set forth in Bell Atl. Corp. v. Twombly, 550 U.S. 544
(2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). See United States v. $22,173.00 in
U.S. Currency, No. 09-7386, 2010 WL 1328953, at *2 (S.D.N.Y. Apr. 5, 2010).2 Under
Supplemental Rule G(2), a complaint must “state sufficiently detailed facts to support a
reasonable belief that the government will be able to meet its burden of proof at trial.”
Fed. R. Civ. Proc. Supp. G(2)(f).
III.

DISCUSSION

Chan moves to dismiss the Complaint, arguing that the Government failed to plead
that Chan acted with the intent to evade the reporting requirement. The Government
opposes the motion, arguing that intent can be inferred from the allegations in the
Complaint. The Government also argues that Chan lacks standing to bring the motion.3
Because standing is a threshold issue, the Court will address the Government’s standing
argument, followed by the merits of Chan’s motion to dismiss. See United States v.
2

Nevertheless, some courts have observed that the language used to describe the Civil Rule
12(b) standard is quite similar to the language used to describe the pleading standard under
Supplemental Rule G(2). $22,173.00 in U.S. Currency, 2010 WL 1328953, at *2 n.25.
3
The Government did not formally move to strike Chan’s claim.
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$8,221,877.16 in U.S. Currency, 330 F.3d 141, 150 n.9 (3d Cir. 2003) (“standing is a
threshold issue that determines whether a party is properly before the court”).
A. Standing
The Government argues that Chan lacks standing to challenge the forfeiture. The
Court disagrees.
Because the only initial parties to a civil forfeiture action are the Government, as
the plaintiff, and the property the Government seeks to forfeit, as the defendant, forfeiture
cases present unique standing issues. Any individual or entity that wishes to assert a
claim to the property can do so only by intervening in the action as a claimant. “A
forfeiture claimant must meet both Article III and statutory standing requirements before
it may stand before a court to contest a forfeiture.” $8,221,877.16 in U.S. Currency, 330
F.3d at 150 n.9. “Article III standing requires the claimant to show an interest in the
property sufficient to create a case or controversy.” In re Friko Corp., 971 F.2d 974, 984
(3d Cir. 1992). To create a “case or controversy” the potential claimant must
demonstrate a colorable interest in the property. Munoz-Valencia v. U.S., 169 Fed. App’x
150, 152 (3d Cir. 2006). To establish statutory standing, a claimant must comply with
the procedural requirements delineated in the Supplemental Rules and the Civil Asset
Forfeiture Reform Act of 2000 (“CAFRA”), 18 U.S.C. § 983, et seq. United States v.
$39,557.00, More or Less, in U.S. Currency, 683 F. Supp. 2d 335, 338 (D.N.J. 2010).
The Government filed this action pursuant to Supplemental Rule G, which governs
forfeiture in rem actions arising from a federal statute. Rule G provides that “[a] person
who asserts an interest in the defendant property may contest the forfeiture by filing a
claim in the court where the action is pending.” Fed. R. Civ. Proc. Supp. G(5)(a)(i).
Rule G provides that the claim must:
(A) identify the specific property claimed; (B) identify the claimant
and state the claimant’s interest in the property; (C) be signed by
the claimant under penalty of perjury; and (D) be served on the
government attorney . . . .
Id. The purpose of the Rule G requirements is to provide notice to the Government of the
claimant’s interest in the property and to minimize the danger of false claims. See United
States v. $39,557.00, More or Less, in U.S. Currency, 683 F. Supp. 2d 335, 339 (D.N.J.
2010). Rule G provides that the claim must be filed within the time limits set forth in the
notice of forfeiture sent to potential claimants. Fed. R. Civ. Proc. Supp. G(5)(a)(ii)(A);
see also 18 U.S.C. § 983(a)(4)(A) (2009). The Third Circuit has stated that district courts
should require forfeiture claimants to “strictly adhere to the filing requirements,” United
States v. $487,825.000 in U.S. Currency, 484 F.3d 662, 665 (3d Cir. 2007), but should
not be so strict in interpreting those requirements that the outcome defies “old-fashioned
common sense.” United States v. Various Computers & Computer Equip., 82 F.3d 582,
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585 (3d Cir. 1996) (quoting United States v. One Urban Lot Located at 1 St. A-1,
Valparaiso, Bayamon, Puerto Rico, 885 F.2d 994, 1001 (1st Cir. 1989)).
In this case, it is undisputed that the vast majority of the Rule G requirements have
been met. Consistent with Rule G(5)(a)(i)(A), Chan filed a claim identifying the
“$263,327.95 in currency” as the specific property claimed. Claim ¶ 1. Consistent with
Rule G(5)(a)(i)(B), the Claim identifies the claimant as “Steve N. Chan” and states that
Chan has an interest in the property because he is “the sole owner of the defendant in
rem.” Id. Consistent with Rule G(5)(a)(i)(C), Chan signed a Verification for the Claim
stating, “I verify and declare under penalty of perjury that the foregoing is true and
correct.” Verification, ECF No. 4. And, consistent with Rule G(5)(a)(i)(D), Chan served
a copy of the Claim on the Government attorney. See May 25, 2012 Cert. of Service,
ECF No. 4. In addition, there is no dispute that Chan’s Claim was timely filed. Chan
filed his Claim on May 25, 2012, which was within the time limits set forth in the
Government’s Notice of Forfeiture. See Notice at 2-3. The Government’s sole argument
with respect to standing is that Chan’s Claim does not describe Chan’s interest in the
property with sufficient detail.
The amount of information that is necessary to “state the claimant’s interest in the
property” under Rule G(5)(a)(i)(B) is an open question of law in the Third Circuit. The
Supplemental Rules do not contain any pleading standards for claims, and Rule
G(5)(a)(i)(B) does not specify the extent to which a claim must describe the claimant’s
interest. The Third Circuit has not decided this issue. In United States v. $487,825.000
in U.S. Currency, 484 F.3d 662 (3d Cir. 2007), the Third Circuit held that a claim was
deficient because it “contain[ed] no description of [the claimant’s] interest in the
property” at all, and instead “merely denie[d] the allegations made by the government in
its complaint.” Id. at 665. However, the Third Circuit did not discuss the amount of
information that would be necessary to satisfy this requirement.
Other cases from the District of New Jersey also provide little guidance. There are
a few cases from this District stating that a “bald assertion of ownership” is insufficient to
identify a claimant’s interest in the property. United States v. $39,557.00, More or Less,
in U.S. Currency, 683 F. Supp. 2d 335, 339 (D.N.J. 2010). However, these statements
were made in cases where there were numerous other deficiencies with the claim. In
$39,557.00, for example, the court held that a putative claimant lacked standing because
he failed to verify his claim, his answer, and his interrogatories, he improperly used his
affidavit from the administrative forfeiture proceedings, and he failed to sufficiently
identify his interest in the property, even though the court “provided multiple
opportunities for [him] to file sufficient responses.” $39,557.00, 683 F. Supp. 2d at 33941. Similarly, in United States v. $140,000.00 In U.S. Currency, No. 09-3516, 2010 WL
1704966 (D.N.J. Apr. 26, 2010), the court held that a putative claimant lacked standing
because she never filed a claim, she filed an untimely answer, she improperly attached
her certification from the administrative forfeiture proceedings, she improperly attached
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another unsigned answer certification, and neither certification contained a description of
her interest in the property. Id. at *3-4.
In this case, all of the other statutory requirements have been met. Further, the
Government’s Complaint in this case contains allegation after allegation describing
Chan’s interest in the property. The Government alleges that the IRS-CI investigated
bank accounts held “in the name and/or for the benefit of Steve Chan”; that “Chan
maintains [several] bank accounts”; that the “Sovereign Bank personal checking account”
was held “in the name of Steven N. Chan”; that the “TD Bank, N.A. personal checking
account” was held “in the name of Steve Chan”; that the TD Bank, N.A. “personal
savings account” was held “in the name of Steve Chan”; that the “Merrill Lynch
Brokerage account” was held “in the name of Steve N. Chan”; and that “Chan” engaged
in dozens of financial transactions using his accounts. Compl. ¶¶ 2, 11, 19, and
Attachment A.
The Government now wants Chan removed from the case because he did not
provide a detailed enough description of his connection to the property. Such a request
defies “old-fashioned common sense.” See Various Computers, 82 F.3d at 585. It is
eminently clear to the Government and the Court that the Claimant has an interest in the
property. See Various Computers, 82 F.3d at 585 (reversing district court’s denial of
standing in part because “[b]oth the court and the Government were aware of the source
of [the claimant’s] interest in the property and the basis for his claim of ownership”).
Furthermore, in cases where the complaint describes the claimant’s interest in the
property in detail, the goals of the Rules have been met because the Government is on
notice of the claimant’s interest in the property, and there is very little risk that the
claimant is filing a false claim. The application of the statutory requirements should be
strict, but not needlessly pedantic.
Accordingly, the Court finds that a simple description of a claimant’s interest in
the property is sufficient where, as here: (1) the claim meets all the other statutory
requirements, and (2) there is no real dispute that the claimant has an interest in the
property. In so holding, this Court follows numerous other courts that have held that a
simple statement of ownership will suffice. See, e.g., U.S. v. $191,910.00 in U.S.
Currency, 16 F.3d 1051, 1058 (9th Cir. 1994) (“a simple claim of ownership will be
sufficient to create standing to challenge a forfeiture”) (superseded by statute on other
grounds); U.S. v. $40,000 in U.S. Currency, 763 F. Supp. 1423, 1427 (S.D. Ohio 1991) (a
potential claimant “need not supply facts” in identifying ownership interest as that
information only “become[s] important later in a forfeiture proceeding)”; U.S. v.
$80,760.00 in U.S. Currency, 781 F. Supp. 462, 467 n.15 (N.D. Tex. 1991) (stating that a
demand “that claimants show a legitimate source [explaining their interest in the
property] for the purpose of establishing standing improperly accelerates the claimants’
ultimate burden”).

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Because Chan’s simple claim of ownership is sufficient to satisfy the requirements
of Rule G(5)(a)(i)(B), the Court finds that Chan has standing to challenge the forfeiture.
B. Motion to Dismiss
Chan moves to dismiss the Complaint for failure to allege intent. The Court finds
that the motion to dismiss should be denied.
Chan argues that the Complaint should be dismissed because the Government
failed to allege intent to evade the reporting requirements, as required by 31 U.S.C. §
5324. That statute provides that:
No person shall, for the purpose of evading the reporting
requirements of section 5313(a) . . . structure or assist in
structuring, or attempt to structure or assist in structuring, any
transaction with one or more domestic financial institutions.
31 U.S.C. § 5324(a)(3) (emphasis added). Thus, Chan argues that the Government was
required to allege sufficient facts to support the inference that (1) Chan knew about the
reporting requirements, and that (2) Chan acted with the intent to evade those
requirements. See Mot. to Dismiss at 5, ECF No. 7. Chan is correct that the Complaint
does not include a single allegation of knowledge or intent. However, the Complaint
does state sufficiently detailed facts to support a reasonable belief that the Government
will be able to meet its burden of proving intent at trial.
The Complaint sets forth numerous factual allegations that support the inference
that Chan intended to evade the reporting requirements.
First, the Complaint alleges that Chan managed to deposit over $658,000 in a 12month period without making a single deposit of over $10,000. Compl. ¶ 19; see also
Gov.’s Opp. Br. at 9-10. The Complaint alleges that there were dozens of deposits that
were close to the $10,000 threshold, but not one that crossed it.
Second, the Complaint and supporting documents allege that Chan frequently
deposited cash at different banks on the same day, and kept all the transactions below
$10,000. For example, on January 21, 2011, Chan made a $6,000 deposit at Bank of
America, a $6,000 deposit at TD Bank, and a $6,000 deposit at Sovereign Bank. Compl.
Attachment A. Likewise, on March 3, 2011, Chan made a $9,000 deposit at TD Bank
and an $8,000 deposit at Sovereign Bank. Id.
Third, the Complaint and supporting documents allege that Chan made numerous
“split deposits,” meaning that he made two deposits at the same bank on the same day,
but made the deposits at different times. Gov.’s Opp. Br. at 10. For example, on March
1, 2011, Chan made two separate deposits at Sovereign Bank, one for $9,700 and another
for $8,990. Compl. Attachment A. Likewise, on March 11, 2011, Chan made two
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separate deposits at Sovereign Bank, one for $8,300 and one for $9,000. Id. That same
day, Chan deposited $8,000 at Bank of America and $8,900 at TD Bank, for a one day
cash total of $34,200. Id.
On the basis of these allegations, it is reasonable to infer that Chan knew about the
reporting requirements and acted with the intent to evade those requirements. It is
reasonable to infer that Chan could not have spent an entire year depositing large sums of
money without making a single deposit of over $10,000, unless he did so intentionally.
Similarly, it is reasonable to infer that Chan would not have gone to the extraordinary
effort of regularly visiting multiple banks multiple times a day, unless he was doing so
with the intent to evade the reporting requirements. Accordingly, the Complaint states
sufficiently detailed facts to support a reasonable belief that the Government will be able
to meet its burden of proving intent at trial.
Because the Complaint satisfies the pleading standards set forth in Supplemental
Rule G(2)(f), the motion to dismiss is denied.
IV.

CONCLUSION

For the reasons stated above, Chan’s motion to dismiss is DENIED. An
appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: March 27, 2013

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