UNITED STATES OF AMERICA v. CURRENCY, $115,471.00 IN U.S.
Filing
33
MEMORANDUM OPINION AND ORDER signed by JUDGE N. C. TILLEY, JR on 07/03/2017. For the reasons stated herein, IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment [Doc. # 21 be GRANTED.(Taylor, Abby)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
UNITED STATES OF AMERICA,
Plaintiff,
v.
$115,471.00 in U.S. CURRENCY,
Defendant.
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)
)
)
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)
)
)
1:11CV318
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff’s Motion for Summary Judgment
[Doc. #21] in its civil in rem action for the forfeiture of defendant currency.
Plaintiff United States of America (“the Government”) argues that it has met its
burden of showing by a preponderance of the evidence that the defendant
currency is forfeitable. (Pl.’s Br. in Supp. of Summ. J. [Doc. #22].) Claimant Jose
Joel Torres Gonzalez disputes such a conclusion and also seems to argue that,
even if the Government had met its burden, he is an innocent owner of the
defendant currency. (Br. in Opp’n to Pl.’s Mot. for Summ. J. [Doc. #28].) For the
reasons explained herein, the Government’s Motion is granted.
I.
As a preliminary matter, the Government has submitted two declarations,
among other exhibits, in support of its Complaint and Motion, one from Kevin
Cornell (Cornell Decl., Apr. 25, 2011 [Doc. 1-1]), a Deputy Sheriff in the Guilford
County Sheriff’s Office and a Task Force Officer with the Drug Enforcement
Administration, and one from Eric Stanley (Stanley Decl., Feb. 6, 2017 [Doc. #22-
2]), a Master Corporal in the Special Operations Division/Canine Unit of the
Guilford County Sheriff’s Office. While Corporal Stanley’s declaration is based
solely on his personal knowledge as a responding canine officer, (see Stanley Decl.
¶¶ 2-5), Deputy Cornell’s declaration is based on his “personal knowledge and
experience and on information provided by officers who participated in the events
described [in the declaration]”, (Cornell Decl. ¶ 2 (emphasis added)).
Despite Deputy Cornell’s attesting to factual details, he does not state that
he was a participant in any of the activities he describes, nor does he appear to
have been a participant. (See id. ¶¶ 3-23.) Instead, these details are likely those
to which he referred as having been provided by officers who did participate in the
relevant events. The only portion of his declaration which is based on his personal
knowledge and experience is his description of drug traffickers, drug sales, and
related cash. (See id. ¶ 19; see also ¶ 23 (giving opinion as to probable cause).)
Any other statements are hearsay to which the Government has not argued an
exception applies.
Accordingly, in its presentation of the undisputed facts, the Court will not
use the hearsay statements in Deputy Cornell’s declaration. See United States v.
$94,200.00 in U.S. Currency, No. 1:11CV609, 2012 WL 2885129, at *3 n.3
(M.D.N.C. July 13, 2012) (citing United States v. 524 Cheek Rd., 425 F. Supp. 2d
704, 708 n.3 (M.D.N.C. 2006)); United States v. $864,400.00 in U.S. Currency,
No. 1:05CV919, 2009 WL 2171249, at *2 n.3 (M.D.N.C. July 20, 2009), aff’d,
405 F. App’x 717 (4th Cir. 2010). Cf. United States v. Currency, U.S.,
2
$147,900.00, 450 F. App’x 261, 264 n.2 (4th Cir. Oct. 14, 2011) (unpublished)
(reviewing the admission of hearsay for plain error and finding none because, prior
to the 2000 passage of the Civil Asset Forfeiture Reform Act (“CAFRA”), courts
routinely permitted the Government to rely on hearsay evidence in forfeiture
proceedings and only one appellate court has since explicitly recognized that
hearsay evidence is no longer admissible).
II.
A.
The following undisputed facts are taken from State v. Torres-Gonzalez, 741
S.E.2d 502 (N.C. Ct. App. 2013), unless otherwise noted. In October 2010,
Detective Mounce1, an officer in the Vice Narcotics Division of the Guilford County
Sheriff’s Department, was working undercover when he was introduced to Ramone
Ramirez Blanco, a suspected drug dealer. Id. at 505. Detective Mounce met with
Blanco to purchase a small amount of cocaine and later began to inquire about
purchasing larger quantities of cocaine. Id. The two set up a deal for November
16, 2010 for the sale of fifteen ounces, or about 425 grams, of cocaine for
$18,000. Id. After Detective Mounce arrived at the Belk parking lot at Four
Seasons Mall, Blanco also arrived. Id. Gonzalez2, with whom Detective Mounce
had no prior contact, was in the passenger seat. Id. After confirming that
1
Detective Mounce’s first name is not provided in the Court of Appeals opinion,
nor elsewhere in the materials before the Court.
2
In his brief in opposition to the Government’s motion for summary judgment, the
Claimant refers to himself as Gonzalez.
3
Detective Mounce and another undercover detective had the purchase money,
Blanco told Detective Mounce that he and Gonzalez had to go pick up the cocaine.
Id.
Blanco and Gonzalez then drove to Blanco’s home where Gonzalez’s vehicle
was parked. Id. at 506. The plan was for Gonzalez to go to his home, get the
cocaine, and then meet Blanco at a nearby Food Lion where Blanco would pick up
the drugs. Id. After Blanco had been waiting at the Food Lion for a period of time,
he called Gonzalez who had people at his house and required Blanco to come there
to pick up the cocaine. Id. While under surveillance, Blanco left Food Lion, drove
to Gonzalez’s house, and retrieved the cocaine at which time Gonzalez told Blanco
to return with the money and make sure he was not being followed. Id. Blanco
then called Detective Mounce, and they eventually met at a Home Depot where the
sale of cocaine was completed and Blanco arrested. Id.
While Blanco’s possessions were being processed, one of his two cell
phones rang repeatedly. Id. The cell phone number was matched to Gonzalez
whose address was determined to be the same residence Blanco visited to retrieve
the cocaine. Id. That night, law enforcement obtained a search warrant for
Gonzalez’s residence which had been under surveillance throughout the application
process. Id. During the execution of the search warrant, law enforcement found
triple-beam scales and “two $100 bills, two cardboard boxes containing a total of
fifteen bundles of money, a paper bag with seven envelopes of money, two
individual envelopes containing more cash, and Defendant’s wallet, which
4
contained $342. The cash found at the scene totaled $115,3713.” Id. According
to Gonzalez’s son, Joel Gonzalez Lopez, Jr., who observed officers as they
conducted the search and seized the money, the money was found in a kitchen
cabinet, under the bed in the master bedroom, and from the master bedroom
closet. (Lopez Aff. ¶ 7 [Doc. #26].) Based on Deputy Cornell’s training and
experience, drug traffickers store proceeds from drug sales in an area that gives
them access to the funds for future drug transactions and that they deal in bulk
cash in order to conceal their activities and to avoid the creation of a paper trail.
(Cornell Decl. ¶ 19.)
Corporal Stanley and his canine partner Bo responded to the residence
during the search. (Stanley Decl. ¶ 3.) Corporal Stanley directed Canine Bo to
conduct a narcotics detection sniff of the interior of the residence. (Id. ¶ 4.) In
Gonzalez’s bedroom, Canine Bo positively alerted to the presence of an illegal
narcotic odor on the left front corner of the bed. (Id.) After searching the
residence, the cash seized was combined and Canine Bo was directed to conduct a
sniff of the currency, the result of which was a positive alert to the odor of
narcotics. (Id. ¶ 5.) Gonzalez was found guilty by a jury of felony conspiracy to
traffic in cocaine. Gonzalez, 741 S.E.2d at 507.
3
Although the Court of Appeals recounted that the cash totaled $115,371,
Gonzalez does not dispute that the amount of currency allegedly forfeitable is
$115,471.
5
B.
Also undisputed is that Gonzalez operated a sole proprietorship, JTG Drywall
& Paint, from approximately 2000 until 2010 when he was arrested for the
offense described above. (Lopez Decl. ¶ 2.) From 2005 to 2010, the years for
which Gonzalez’s joint tax returns were submitted4, the business had increasingly
significant gross receipts and corresponding increasingly significant expenses. (See
2005-2010 Tax Returns [Doc. #22-3] (showing $211,037 in gross receipts and
$201,226 in total expenses for 2005; $285,362 in gross receipts and $264,925
in total expenses for 2006; $297,888 in gross receipts and $260,959 in total
expenses for 2008; $486,572 in gross receipts and $419,272 in total expenses
for 2009; and $915,847 in gross receipts and $831,439 in total expenses for
2010).5)
JTG Drywall & Paint had many customers, many of which were companies
doing repeat business, while some were homeowners. (Lopez Aff.6 ¶ 8.)
4
Gonzalez did not produce a tax return for 2007.
Gonzalez’s tax returns for 2005 to 2010 are also attached as Exhibit 4 to Lopez’s
affidavit submitted in support of Gonzalez’s claim. Exhibit 4 contains more
complete copies of the tax returns by including, for example, Schedule SE, EIC
worksheet, and Carryover worksheet. Because Exhibit 4 was filed conventionally
with the Court with no redactions and, but for the additional schedules and
worksheets, the Government’s copies and Lopez’s copies of the tax returns are
identical, the Court cites to the Government’s electronic and redacted exhibits.
6
Lopez attests to having always worked with his father as soon as he was able to
work and having been active in operating the business. (Lopez Aff. ¶ 2.) He
actively assisted his father with the business’s books, records, finances, handling
of money, carrying out business, paying employees, and other aspects of the
business. (Id. ¶ 3.) Statements made by Lopez attributable to this personal
knowledge are included here.
5
6
Companies issued 1099’s and “ordinarily” paid by check, while homeowners paid
in cash. (Id.) Gonzalez’s “standard practice” was to “[s]ometimes” take the
customer’s check to his bank, deposit part of it, and cash part of it. (Id. ¶ 9.)
“[M]ore frequently,” he would cash the check in its entirety at the customer’s
bank. (Id.)
The business’s expenses included vehicle expenses, contract labor,
insurance, interest, legal and professional services, office expenses, equipment
leases, supplies, taxes and licenses, meals and entertainment, and utilities, the
largest of which by far was labor. (See 2010 Tax Return [Doc. #22-3 at 21].)
While some employees were paid in cash, (cf. Lopez Aff. ¶ 12 (noting that “all”
employees were paid in cash)), thirteen of the approximately twenty employees in
2010 were paid throughout the year by check from an account in the name of
Jose J Torres Gonzales Special Account, (Payroll Checks [Doc. #29-1]; Lopez Aff.
¶ 12 (averring that from 2005 to 2010 his father had between five and twenty
employees and that at the time of his arrest he had “more like 20 employees”)),
the checks totaling nearly $90,000, compared to the $595,555 claimed as
contract labor expenses for the year, (2010 Tax Return). In addition, although
Gonzalez purchased “significant quantities” of materials in cash, he bought “most”
materials with credit cards. (Lopez Aff. ¶ 12.)
After accounting for business expenses and self-employment taxes,
Gonzalez and his homemaker wife had an adjusted gross income (“AGI”) in 2010
of $78,444. (2010 Tax Return; see also 2005 Tax Return (showing an AGI of
7
$9,118); 2006 Tax Return (showing an AGI of $21,493); 2008 Tax Return
(showing an AGI of $34,320); 2009 Tax Return (showing an AGI of $62,545).)
Gonzalez’s business supported him, his homemaker wife, and their four dependent
children. (See 2005-2010 Tax Returns.) The family’s expenses in 2010 included
mortgage payments of $18,000, (see Check to Wells Fargo Home Mortg. from
Jose Joel-Torres Gonzalez, Sept. 27, 2010 [Doc. #22-4]), medical and dental
expenses of $17,467, (2010 Tax Return), utility payments of $2,033.59 through
October, (see Checks to Duke Energy from Jose Joel-Torres Gonzalez [Doc. #225]), charitable donations of $1,800, (2010 Tax Return), and $465 for tuition and
pet care, (see Checks from Jose Joel-Torres Gonzalez and Jose J Torres Gonzalez
Special Account [Doc. #22-6]). Although Gonzalez did not provide the
Government an itemization of his household expenses for 2010, budget calculators
from the United States Department of Agriculture for a family of six in the
suburban south, the Massachusetts Institute of Technology for a family of five7,
and the Economic Policy Institute for a family of six in the Greensboro/High Point
area each estimate that annual expenses for food, transportation, clothing, and
other necessities exceed $20,000. (U.S. Dep’t of Agric. Cost of Raising a Child
Calculator [Doc. #22-9]; Mass. Inst. of Tech. Living Wage Calculation [Doc. #2210]; Econ. Policy Inst. Family Budget Calculator [Doc. #22-11].) Finally, although
7
Expenses for a family of six were apparently not available. (Pl.’s Br. in Supp. of
Summ. J. at 7 n.6.)
8
Gonzalez and his wife likely did not make the payment in 2010, they owed $8,301
in federal taxes for 2010. (See 2010 Tax Return.)
III.
A.
Summary judgment is appropriate if “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). The moving party bears the initial burden of establishing “the basis
for its motion[] and identifying those portions of ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any,’ which it believes demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (citing Fed. R. Civ. P.
56(c)8). The “mere existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247-48 (1986). A dispute is genuine if a reasonable
jury, based on the evidence, could find in favor of the non-moving party. Id. at
248. The materiality of a fact depends on whether the existence of the fact could
cause a jury to reach different outcomes. Id. This summary judgment standard
applies in civil forfeiture actions. See, e.g., $864,400.00, 2009 WL 2171249, at
*2 (“In essence, the analysis concerns whether the evidence presents a sufficient
8
Rule 56(c) was amended effective December 1, 2010, but the substance of the
rule did not change.
9
disagreement to require submission to a jury or whether it is so one-sided that one
party must prevail as a matter of law.”) (internal quotations omitted).
The Government alleges that the defendant currency is forfeitable pursuant
to either (1) 21 U.S.C. § 881(a)(6) as money furnished or intended to be furnished
by any person in exchange for a controlled substance in violation of the Controlled
Substances Act or as proceeds traceable to such an exchange or (2) 18 U.S.C.
§ 981(a)(1)(C) as property which constitutes or is derived from proceeds traceable
to an offense constituting a “specified unlawful activity” as defined in 18 U.S.C. §
1956(c)(7), or a conspiracy to commit such an offense, the offense being the
exchange of a controlled substance in violation of state or federal law. (Compl.
¶¶ 1, 2 [Doc. #1].)
The burden of proof is on the Government to establish by a preponderance
of the evidence that the property is subject to forfeiture. 18 U.S.C. § 983(c)(1).
Notably, although Gonzalez argues that “specifically the government must
establish that there was a ‘substantial connection’ between the property sought to
be forfeited and the criminal offense,” (Br. in Opp’n to Pl.’s Mot. for Summ. J. at
6), that burden is inapplicable here. Section 881(a)(6) of Title 21 provides that
property subject to forfeiture includes:
All moneys, negotiable instruments, securities, or other things of value
furnished or intended to be furnished by any person in exchange for a
controlled substance or listed chemical in violation of this subchapter,
all proceeds traceable to such an exchange, and all moneys,
negotiable instruments, and securities used or intended to be used to
facilitate any violation of this subchapter.
10
The Government is not arguing that the currency seized at Gonzalez’s residence
was involved in, used in, or facilitated the drug sale on November 16, 2010, nor
could it do so successfully in light of the evidence, (see Torres-Gonzalez, 741
S.E.2d at 505-06). Instead of arguing that the seized currency was used or
intended to be used to facilitate the November 16, 2010 offense, the Government
argues that the seized currency was intended to be furnished in exchange for drugs
in other transactions or was proceeds from previous drug transactions. As a
result, the Government does not need to establish a substantial connection
between the seized currency and the November 16, 2010 drug sale. See 18 U.S.C.
§ 983(c)(3) (requiring the Government to establish a substantial connection
between the property and the criminal offense).
The Government may rely on circumstantial evidence to establish
forfeitability, United States v. Herder, 594 F.3d 352, 364 (4th Cir. 2010), and the
“[p]roceeds need not be tied to any particular identifiable drug transaction”, United
States v. 998 Cotton St., Forsyth Cty., No. 1:11-CV-356, 2013 WL 1192821, at
*13 (M.D.N.C. Mar. 22, 2013). It is the examination of the totality of the
circumstances that determines whether the Government has met its burden. United
States v. $98,669.60 in U.S. Currency, No. 5:13-CV-585-D, 2017 WL 750701, at
*15 (E.D.N.C. Feb. 23, 2017) (citing United States v. Thomas, 913 F.2d 1111,
1115 (4th Cir. 1990)). For example, “[i]nsufficient legitimate income to explain
expenditures, along with evidence of drug trafficking, is evidence of property
derived illegally.” 998 Cotton St., 2013 WL 1192821, at *13 (citing, among other
11
cases, Thomas, 913 F.2d at 1114 and explaining that, although Thomas was
decided prior to the enactment of CAFRA, Thomas remains relevant “because
factors that weighed in favor of forfeiture in the past continue to do so postCAFRA, although subject to the higher [preponderance of the evidence] burden);
see also $147,900.00, 450 App’x at 264 (citing and quoting United States v.
$174,206.00 in U.S. Currency, 320 F.3d 658, 662 (6th Cir. 2003) as “holding
that ‘evidence of legitimate income that is insufficient to explain the large amount
of property seized’ satisfies the preponderance of the evidence standard”).
Likewise, “possession of large sums of cash at the same time as . . . engagement
in drug activity provides ‘strong evidence that the cash is connected with drug
activity.’” $147,900.00, 450 App’x at 264; see also Thomas, 913 F.2d at 1115
(noting that “the possession of unusually large amounts of cash . . . may be
circumstantial evidence of drug trafficking”).
Here, the totality of the circumstances and the undisputed evidence support
the conclusion that the Government has met its burden. First, Gonzalez was
convicted of felony conspiracy to traffic in cocaine after having participated in the
events of November 16, 2010 during which Blanco sold cocaine9 that he had
retrieved from Gonzalez’s house. Sometime around midnight that night, a search
conducted at Gonzalez’s house revealed $115,47110 in cash found in a kitchen
9
The deal was for the sale of fifteen ounces, about 425 grams, of cocaine for
$18,000.
10
See supra n.3.
12
cabinet, in his master bedroom, and under his bed, among two cardboard boxes
with fifteen bundles of money, a paper bag with seven envelopes of money, two
individual envelopes containing more cash, and Gonzalez’s wallet. In addition, law
enforcement found triple-beam scales in the residence. Canine Bo alerted both to
the left front corner of Gonzalez’s bed and to the seized currency.
Although Gonzalez argues that circulated currency “is mostly contaminated
with cocaine in light of pervasive use of that drug in this country[] so that the
canine alert cannot be conclusively probative (actually not probative at all) of drug
presence in the house” and cites to cases outside the Fourth Circuit from the
1990’s, (Br. in Opp’n to Pl.’s Mot. for Summ. J. at 9), the Supreme Court more
recently determined that an alert by a properly trained canine is entitled to a
presumption of reliability, Florida v. Harris, 568 U.S. 237, 133 S. Ct. 1050, 1057
(2013) (finding that “evidence of a dog’s satisfactory performance in a certification
or training program can itself provide sufficient reason to trust his alert”). See also
$98,699.60, 2017 WL 750701, at *18 (acknowledging that some courts in the
1990’s questioned the validity of a dog alert, but explaining that recently courts
have accepted scientific evidence that “dogs do not alert to innocently tainted
currency in general circulation but only to currency that ‘has been exposed to large
amounts of illicit cocaine within the very recent past’” because they are alerting
“to volatile odors from illegal narcotics that dissipate quickly over time”); United
States v. $200,000 in U.S. Currency, 210 F. Supp. 3d 788, 795 (M.D.N.C. 2016)
(citing and quoting Harris and evaluating the relevant canine’s training and
13
certification) appeal filed sub nom. United States v. Damian Phillips, No. 16-2358
(4th Cir. 2016). According to his partner Corporal Stanley, “Canine Bo is a Dutch
Shepherd, a breed specifically selected for their keen senses and ability to be
trained to detect the odor of narcotics.” (Stanley Decl. ¶ 1.) Canine Bo was
initially certified in September 2010, two months prior to his alert inside Gonzalez’s
house and to the seized currency, with the North American Police Work Dog
Association. (Id.) Since then, he has been recertified every year by the same
organization. (Id.) As such, Canine Bo’s alerts to Gonzalez’s bed and the seized
currency are presumed reliable, and Gonzalez has offered no evidence to rebut the
presumption.
Next, although Gonzalez’s drywall and paint business had significant gross
receipts, particularly in 2010, the business’s steep expenses drained it, and
consequently Gonzalez, of most of its income. While Gonzalez’s adjusted gross
income for 2010 of $78,444 was greater than in previous years, it was, as the
Government describes, modest for a family of six with expenses that have been
conservatively estimated to be at least $60,000, not including the $8,301 that
Gonzalez owed in federal taxes for the year.
Next, Gonzalez maintained bank accounts from which he paid personal and
business expenses belying the likelihood that he needed to keep over $100,000 of
cash on hand for accounts payable. He paid his mortgage and utilities from an
account in the name of Jose Joel-Torres Gonzalez and other personal and business
expenses, including employee payroll at least in part, from an account in the name
14
of Jose J Torres Gonzalez Special Account. Gonzalez’s son acknowledged that,
even though his father bought significant quantities of supplies in cash, he
purchased most of his materials with credit cards. Those credit cards, along with
most of the other business expenses, including at least insurance, interest, legal
and professional services, equipment leases, taxes, and utilities, were more than
likely not paid in cash. While the payroll checks written throughout 2010 to
thirteen of the approximate twenty employees total nearly $90,000 compared to
the $595,555 in contract labor expenses that Gonzalez claimed in 2010, the
checks are evidence that some labor expenses were not paid in cash.
In sum, the totality of the circumstances, including the undisputed evidence
of Gonzalez’s conviction for felony conspiracy to traffic in cocaine, the narcotics
alerts on the corner of his bed and the seized currency by a certified canine, the
location and storage of $115,471 in cash in Gonzalez’s home, Gonzalez’s
maintenance and use of bank accounts for personal and business expenses, and
modest adjusted gross income to support a family of six considering the family’s
expenses, show that it is more likely true than not that the $115,471 in U.S.
currency seized from Gonzalez’s residence was furnished or intended to be
furnished in exchange for a controlled substance, was proceeds traceable to such
an exchange, or was money constituting or derived from proceeds traceable to
specified unlawful activity which includes the exchange of a controlled substance
in violation of state or federal law.
15
B.
Because the Government has met its burden, Gonzalez may argue, as he
seems to do here, that he is an innocent owner of the subject property, but he
must prove this defense by a preponderance of the evidence. 18 U.S.C.
§ 983(d)(1). In support of this contention, his son avers and submits evidence
that the seized currency consists of proceeds from Gonzalez’s drywall and paint
business. Thus, pursuant to 18 U.S.C. § 983(d)(3)(A), Gonzalez appears to argue
that he acquired his property interest after the conduct giving rise to the forfeiture.
In other words, the currency was tainted with the odor of narcotics prior to
Gonzalez’s receipt of the cash. He is considered an innocent owner in this context
if, at the time that he acquired the interest in the property, he was a bona fide
purchaser or seller for value (including a purchaser or seller of goods or services for
value) and did not know and was reasonably without cause to believe that the
property was subject to forfeiture. Id. Certainly, Gonzalez argues as much, but he
does not meet his burden of showing by a preponderance of the evidence that he
is an innocent owner.
Conspicuously, although not required to do so, Gonzalez does not himself
submit an affidavit or declaration in support of his argument that he is the innocent
owner of the defendant currency. Instead, his son, Joel Gonzalez Lopez, Jr., who
was “fully familiar with the way in which [his] father’s business operated” in 2010,
submitted an affidavit on his father’s behalf. (Lopez Aff. ¶ 3.) He “was completely
familiar with the books and records, the finances, the handling of money, the way
16
in which the business was carried out, the relationships and payment of the
employees, the payment by the persons for whom [they] did business, and all
other aspects of the business.” (Id.) He actively assisted his father with the
business and, after his father was imprisoned, took over the business. (Id.) He
avers that he is “fully satisfied, based on [his] familiarity with the operations of the
business, that the entire $115,471.00 seized from [the] home on November 17,
2010, consisted of proceeds” from his father’s drywall and paint business. (Id.
¶ 6.) Specifically, he states that the proceeds were “receipts [from persons and
companies for whom JTG Drywall & Paint had done work and provided materials]
that had not yet been expended”. (Id.)
Lopez avers that his father’s business had “many customers, many of whom
were companies which did repeat business, and some of whom were individual
homeowners.” (Id. ¶ 8.) In support of this assertion, Lopez attaches copies of
1099’s issued by repeat business customers from 2005 to 2010 that he was able
to locate. (Id. & Ex. 1.) These companies “ordinarily” paid by check, while
homeowners paid in cash. (Id. ¶ 8.) His father “had a standard practice . . . with
respect to the checks paid him by the companies”. (Id. ¶ 9.) “Sometimes” he
would take the customer’s check to the bank, “cash the check,” “keep some of
the cash,” and “deposit some of the cash.” (Id.) Lopez attaches bank deposit slips
that he was able to locate from 2005 to 2010 that “reflect[]” “[t]hese
transactions”. (Id. & Ex. 2.) In further support, Lopez offers a chart listing various
dates and dollar figures corresponding to bank deposits during 2008 that he
17
considers to be “[e]xamples of notations by [Gonzalez] on some of these bank
deposits showing the gross amount of the check cashed, and the amount that was
deposited”. (Id. ¶ 10.) “Otherwise, and more frequently, [Gonzalez] would cash
the customer’s check, usually at the customer’s bank, and keep all of the amount
paid as cash.” (Id. ¶ 9.) Lopez also attaches “a number of the check stubs from
payments [his] father received from his customers”, but they “represent only a few
of the check stubs during the years 2005 to 2010.” (Id. ¶ 11 & Ex. 3.)
As for Gonzalez’s business expenses, according to Lopez, at the time of his
father’s arrest, the business employed “more like 20 employees” whom his “father
always paid . . . in cash.” (Id. ¶ 12.) His employees earned between $25,000 and
$40,000 per year, “[a]ll of [which] was paid in cash by [Gonzalez].” (Id.) Gonzalez
“bought most of his materials with credit cards, but he bought significant
quantities in dollar amounts of materials with cash.” (Id.)
The Government does not dispute that Gonzalez’s business had significant
gross receipts in 2010 and, thus, argues that Lopez’s evidence of those receipts,
including the 1099’s and check stubs, is immaterial. (Pl.’s Reply Br. at 2-3 [Doc.
#29].) The Government also does not dispute the accuracy of Gonzalez’s tax
returns, which it acknowledges show the business’s gross receipts, expenses
including labor, and profits. (Id. at 3, 4.) Neither Lopez nor Gonzalez dispute the
Government’s calculation, presentation, or evidence of Gonzalez’s personal
expenses. Thus, neither the Government nor Gonzalez disputes the gross proceeds
18
from his business, his business and personal expenses, or his personal adjusted
gross income.
The disputes rest on Lopez’s averments that the seized currency was
essentially cash that Gonzalez obtained when he cashed his customers’ checks,
that he paid all of his likely 20 employees in cash, each of whom earned between
$25,000 and $40,000 per year, and that he purchased significant quantities of
materials in cash (while also buying most of his materials with credit cards). But,
these disputes are not genuine, as a reasonable jury could not find in favor of
Gonzalez based on the evidence.
While Lopez offers a chart explaining various notations on some deposit slips
in 2008 to illustrate his father’s practice of depositing less than the gross amount
of a check, he does not explain how he knows that the notations he specifies are
his father’s, or that the numerical notations represent the gross check amount, or
why notations on other deposit slips are distinguishable and, hence, not included in
the chart, or why notations on deposit slips from 2008 support the conclusion that
his father had over $100,000 in cash in November 2010, other than his conclusory
and vague statement that deposit slips from other years “reveal patterns
consistent” with the 2008 deposit slips. The same problems with the chart of
selected 2008 deposit slips are evident with the other attached deposit slips.
There is no way to determine the gross amount of a particular check to show the
amount of cash back that Gonzalez received. Sometimes there are numerical
19
notations, but there is no way to know what they represent or who made them or
how many different people made them.
Despite Lopez’s repeated statements to the contrary, Gonzalez did not pay
all of his employees in cash. The Government submitted copies of over 150
paychecks from Gonzalez to thirteen different employees throughout 2010 until his
arrest in November. While the checks total nearly $90,000, significantly less than
the $595,555 that Gonzalez attributed to “contract labor” expenses in his 2010
Tax Return, they are evidence that Gonzalez did not pay all of his employees in
cash.
Although Lopez avers that his father purchased significant quantities of
materials with cash, he acknowledges that his father bought most of his materials
with credit cards. A review of Gonzalez’s tax returns shows other business
expenses that, more likely than not, Gonzalez also did not pay in cash, including
insurance, legal and professional services, office expenses, equipment leases,
taxes and licenses, and utilities. Despite Lopez’s speculative assertion that the
entire11 $115,471 in cash was proceeds from his father’s business that had not
yet been spent, Gonzalez has submitted no evidence to support such a conclusion.
It is more likely true than not that Gonzalez would not have $115,471 in
uncommitted legitimate cash revenues in mid-November 2010.
11
Gonzalez makes no argument that any amount less than the entire $115,471
was from his legitimate business.
20
In sum, Gonzalez has not met his burden by a preponderance of the
evidence that he is the innocent owner of the seized currency. As a result,
because the undisputed evidence supports the conclusion that the Government
showed by a preponderance of the evidence that the seized currency was either
money furnished or intended to be furnished in exchange for a controlled
substance, proceeds traceable to such an exchange, or money constituting or
derived from proceeds traceable to specified unlawful activity which includes the
exchange of a controlled substance in violation of state or federal law, summary
judgment in the Government’s favor is appropriate.
IV.
For the reasons stated herein, IT IS HEREBY ORDERED that Plaintiff’s
Motion for Summary Judgment [Doc. #21] be GRANTED.
This the 3 d day of July, 2017.
/s/ N. Carlton Tilley, Jr.
Senior United States District Judge
21
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