United States of America v. $166,450.48 in U.S. Currency et al

Filing 63

OPINION AND ORDER. Based on the foregoing, the government's motion to extend stay of proceedings to all claimant's 38 is GRANTED. Pursuant to 18 U.S.C. § 981(g)(1), the stay previously entered in this case is extended to al l claimants for a period of 120 days. At the conclusion of 120 days, the parties shall submit a joint status report addressing the propriety of continuing the stay. Claimants' motions for summary judgment and for oral argument [29, 31, 32, & 49] are HELD IN ABEYANCE during the pendency of the stay. IT IS SO ORDERED. Signed on 12/16/2013 by Judge Malcolm F. Marsh. (pvh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
UNITED STATES OF AMERICA,

3:13-cv-00562-MA

Plaintiff,

OPINION AND ORDER

v.
$166,450.48 IN UNITED STATES
CURRENCY, et al., in rem,
Defendants.

S. AMANDA MARSHALL
United States Attorney
District of Oregon
KATHERINE C. LORENZ
Assistant United States Attorney
1000 S.W. Third Avenue, Suite 600
Portland, OR 97204-2902
Attorneys for Plaintiff
DAVID H. ANGELI
NOAH H. ELLENBERG
BENJAMIN N. SOUEDE
Angeli Law Group LLC
121 S.W. Morrison Street, Suite 400
Portland, OR 97204
Attorneys for Claimant Michael Knezevich

Ill
1 - OPINION AND ORDER

NORMAN SEPENUK
520 S.W. Yamhill Street, Suite 600
Portland, OR 97204
Attorney for Claimant VanHaverbeke
PAUL J. PASCHELKE
9320 S.W. Barbur Blvd., Suite 135
Portland, OR 97219
Attorney for Claimant Barney
RONALD V. CHOTT
14950 N.W. Oak Hills Dr.
Beaverton, OR 97006
Claimant, pro se
MAUREEN ANNE & MICHAEL JOHN KLOBERTANZ
7535 S.E. Reed College Place
Portland, OR 97202
Claimants, pro se
MOUNT HOOD MINISTRY
c/o Scott D. Haanstad
P.O. Box 1825
Hood River, OR 97031
Claimant, pro se
l"lARSH, Judge
Plaintiff,

the United States of America,

forfeiture proceeding pursuant to 18 U.S.C.

u.s.c.

§§

1345,

1355

&

1395.

§§

brings this civil

98l(a) (1) (A), and 28

Currently before

the

court

motions for summary judgment by Claimants VanHaverbeke,
Maureen
argument

&

Michael Klobertanz
by

Claimant

(#29,

VanHaverbeke

#32,

&

(#31);

Barney,

#49); motion for oral
and

the

government's

motion to extend stay of proceedings to all claimants (#38).
2 - OPINION AND ORDER

are

BACKGROUND

On April 2, 2013, the government filed the instant proceeding
seeking the forfeiture of $166,450.48 in United States currency
seized from Chase Bank account number XXXXXX3320; $121,000.00 in
States

United

currency

seized

from

Alder

Exchange;

Gold

and

$372,000.00 worth of assorted precious metals also seized from
In its complaint, the government alleges that

Alder Gold Exchange.

the defendant currency and assorted precious metals are forfeitable
in

involved

were

they

because

or

transactions

attempted

transactions by Michael Knezevich, the owner and operator of Alder
Gold Exchange,

in violation of 18 U.S. C.

1960

§

(unlawful money

transmitting business).
To establish a violation of section 18 U.S.C.
government

must

prove

that

a

§

1960(a), the

knowingly

defendant

conducts,

controls, manages, supervises, directs, or owns an unlicensed money
transmitting business.

18 U.S.C.

§

1960(a)

&

(b) (1) (B); 31 U.S.C.

5330; see also U.S. v. 47 10-0unce Gold Bars, 2005 WL 221259 (D.Or.
28,

Jan.

"[T]he

2005).

term

'money

transmitting'

includes

transferring funds on behalf of the public by any and all means
including but not limited to transfer within this country or to
locations abroad by wire, check, draft, facsimile, or courier."

u.s.c.
In

§

18

1960(2).
support

of

its

complaint,

the

government

attached

the

declaration of Internal Revenue Service (IRS) Special Agent Scott
3 - OPINION AND ORDER

Agent McGeachy attests that on October 29, 2012, agents

McGeachy.

from the IRS Criminal Investigation Unit and the Portland Police
Bureau seized the defendant currency and precious metals from three
safes located at Alder Gold Exchange, and a Chase Bank account in
the

Precious Metals

of

name

&

Gems,

dba Alder Gold Exchange.

According to Agent McGeachy, at the time of the seizure Knezevich
was unable to differentiate the contents of the three safes as to
whether various items belonged to him or to Alder Gold Exchange
customers.

McGeachy Dec. at

~~

5 & 24.

Knezevich allegedly told

officers that the metals located in any of the safes "might reflect
his personal precious metals, precious metals owned by ALDER GOLD
Id. at

EXCHANGE, or precious metals due to a client."

~

42.

In an attempt to support the government's contention that
Knezevich was conducting an unlicensed money transmitting business,
Agent McGeachy examined two Alder Gold Exchange bank accounts and
discovered what he believes were checks and wire transfers to third
parties on behalf of Alder Gold Exchange customers.
28,

31-37.

According to McGeachy,

in turn,

transferred funds on their behalf to third parties.
~

63.

at~~

25-

two customers confirmed that

they sold gold to Alder Gold Exchange and,

30 & 38, see also

Id.

Knezevich

Id. at

~~

29-

Knezevich also allegedly confirmed this

type of transaction on behalf of a customer identified as "L. S." to
Trinity

Life

Ministries,

4 - OPINION AND ORDER

but

denied

writing

checks

to

car

dealerships, brokerage accounts, or credit card companies.
'!['![

Id. at

3 5 & 4 1.

After being advised of his Miranda rights, Knezevich allegedly
explained the manner in which customers' money and precious metals
were handled:

* * * KNEZEVICH does not charge [customers] a fee, per
se, to store their gold.
However, KNEZEVICH gets the
benefit of a zero interest loan.
KNEZEVICH stated he
will use his customers' precious metals to sell to a
different client at any time without obtaining customer
approval.
KNEZEVICH stated he will eventually replace
the customers' precious metals in the safe at a later
date when the price of the metal is most beneficial for
KNEZEVICH.
KNEZEVICH stated he uses his clients'
precious metals and/or cash without asking their
permission and whenever it is most beneficial to
KNEZEVICH's bottom line of earning a profit through ALDER
GOLD EXCHANGE. KNEZEVICH admitted that he currently owes
some of his clients several thousand dollars.
* * * * *
KNEZEVICH stated that if he owed a client $200,000.00 he
might take metal from ALDER GOLD or from his personal
collection of metal or from another client's metal
collection to pay off the client requesting the $200,000.
McGeachyDec. at

'!['![

40

&

42,

see also

'![

18.

According to Agent

McGeachy, several customers confirmed the fungible nature of the
precious metals they stored at Alder Gold Exchange.

Id. at

'!['![

53

& 57.
On

July

1,

2013,

I

granted

Claimant

unopposed motion to stay this proceeding,
during

the

pendency

of

a

related

whether he violated 18 U.S.C.
5 - OPINION AND ORDER

§

1960.

Michael

Knezevich's

as to his claim only,

criminal

investigation

into

The government now moves to

extend the

stay to all claimants because civil discovery will

adversely affect the government's ability to conduct the related
criminal investigation.
reveal

the

The government argues that discovery will

government's

trial

strategy

in

advance

resolution of this case is complicated by the fact

of

trial;

that it is

stayed as to Knezevich; and the government should not be required
to

provide

pre-indictment

discovery.

In

support

of

these

allegations, the government has submitted the ex parte affidavit of
Agent McGeachy.
DISCUSSION

Pursuant to 18 U.S.C.

§

981(g)(l), "[u]pon the motion of the

United States, the court shall stay the civil forfeiture proceeding
if the court determines that civil discovery will adversely affect
the

ability

of

the

investigation or

Government

the

to

prosecution

conduct

of a

a

related

criminal

related criminal

case."

Under this provision, a stay may be granted regardless of whether
the

opposing

claimant

investigation,

so

demonstrating

that

investigation.

long

is

a

as

the

civil

U.S.

v.

target

of

the

related

government meets

its

discovery would adversely
7 00 Upper Applegate Rd. ,

criminal
burden

affect

of
its

Jacksonville,

Jackson Cty. and Dist. of Oregon, 2013 WL 1767940 (D.Or. Apr. 24,
2013); U.S. v. Approx. $69,577 in U.S. Currency, 2009 WL 1404690 *3
(N.D. Cal. May 19, 2009); U.S. v. Assorted Fiiearms, Motorcycles
and Other Personal Property,
6 - OPINION AND ORDER

677 F.Supp.2d 1214, 1216 (C.D. Cal.

2009);

&

18

u.s.c.

98l(g) (4)

§

If the government requests the

stay, it may submit evidence ex parte in order to avoid disclosing
any

matter

that
18

investigation.

may

adversely

u.s.c.

§

affect

the

ongoing

criminal

981(g) (5) . 1

The pending criminal investigation of Knezevich and this civil
forfeiture proceeding are "related" because they arise out of the
same facts and circumstances and involve common parties.

u.s.c.

981(g) (4).

§

proceeding

will

prosecution.
supporting

Hence,

overlap

the government's

with

that

evidence

presented

in

a

See 18
in this
criminal

After reviewing the government's complaint and the
affidavit,

as

well

as

Agent

McGeachy's

ex

parte

affidavit, I find that civil discovery likely will adversely affect
the ability of the

government

to

conduct

the

related criminal

investigation of Knezevich because it will subject the government's
criminal investigation to broader and earlier discovery than would
occur in a related criminal proceeding.
Although

claimants

argue

that

no

additional

necessary for

the entry of summary judgment

conclude

the

that

government

would be

discovery

in their favor,

compelled to

engage

is
I
in

I reject claimants' assertion that Agent McGeachy's ex
parte affidavit was submitted in opposition to claimants' motions
for summary judgment (rather than pursuant to 18 U.S.C.
§ 981(g) (5)), or that its sufficiency is governed by Fed. R. Civ.
P. 56(d). Cf. See U.S. v. Real Property Located at 149 G Street,
Lincoln, CA. Placer Cty., 2013 WL 2664770 *4 (E.D. Cal. June 12,
2013) (conclusion that action should be stayed similarly
satisfied requirements of Fed. R. Civ. P. 56(d)).
7 - OPINION AND ORDER

discovery

and/or

reveal

information

and

evidence

previously

collected in the course of its criminal investigation in order to
effectively respond to claimants' assertions that they are innocent
owners and/or bona fide purchasers entitled to the return of their
property.

The necessary disclosure of the government's tracing

theories and identification of relevant transactions would run the
risk of prematurely revealing evidence Knezevich could use in his
defense.

See U.S. v. Real Property Located at 6415 North Harrison

Ave .. Fresno Cty., 2012 WL 4364076 *3 ·(E.D. Cal. Sept. 21, 2012);
Assorted

Firearms-Motorcycles

and Other

Personal

Property,

677

F.Supp.2d at 1216.
Moreover,

given the number and complexity of the financial

transactions at issue,

it is likely that discovery would need to

take place before this court could determine if there is a genuine
issue of fact as to whether each claimant is a bailee (entitled to
raise

the

defense

of

being

an

innocent

owner), . or

simply

an

unsecured creditor.'

See U.S. v. Approx. $69,577 in U.S. Currency,

2009 WL 14 04 690 * 3

(staying civil forfeiture case so as not to

subject government to broader and earlier discovery than would
occur

in

criminal proceeding);

2

U.S.

v.

Felber,

1996 WL

795555

Unsecured creditors lack standing to challenge the civil
forfeiture of their debtor's property because they cannot claim
an interest in any particular asset that makes up the debtor's
estate.
U.S. v. $20.193.39 U.S. Currency, 16 F.3d 344, 346 (9' 0
Cir. 1994);, 47 10-0unce Gold Bars, 2005 WL 221259 *4; 18 U.S.C.
§ 983 (d) (6) (B) (i).
8 - OPINION AND ORDER

(D.Or. Oct. 30, 1996)

("[i)t is necessary to examine the intent of

the parties and duties assumed by those parties to resolve whether
a bailment existsn).

Accordingly, I conclude that a stay must be

entered in accordance with 18 U.S.C.

§

981(g)(1).

CONCLUSION

Based on the foregoing, the government's motion to extend stay
of proceedings to all claimants (#38) is GRANTED.
U. S.C.

§

extended

981 (g) (1),
to

all

Pursuant to 18

the stay previously entered in this case is

claimants

conclusion of 120 days,

for

a

period of

120

days.

the parties shall submit a

At

the

joint status

report addressing the propriety of continuing the stay.

Claimants'

motions for summary judgment and for oral argument (#29, #31, #32,
& #49) are HELD IN ABEYANCE during the pendency of the stay.
IT IS SO ORDERED.
DATED this

_d._

day of December, 2013.

Malcolm F. Marsh
United States District Judge

9 - OPINION AND ORDER