United States of America v. $3.072,266.59 in United States Currency et al
Filing
45
OPINION AND ORDER re 28 Motion to Dismiss: DENIED. Signed by Judge Francisco A. Besosa on 07/09/2020. (brc)
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 1 of 35
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
NORBERTO MEDINA-RODRÍGUEZ,
Plaintiff,
v.
Civil No. 19-1236 (FAB)
$3,072,266.59 IN UNITED STATES
CURRENCY, et al.,
Defendants.
OPINION AND ORDER
BESOSA, District Judge.
Claimants
Foreign
Exchange
Bank
Corporation
(“Foreign
Exchange Bank”), Guillermo Guiñazú (“Guiñazú”), and José ManuelO
Guiñazú (collectively, “claimants”) move to dismiss the verified
amended complaint pursuant to Federal Rule of Civil Procedure
12(b)(6).
(Docket No. 28.)
For the reasons set forth below, the
motion to dismiss is DENIED.
I.
Background
The United States seeks to appropriate $5,066,920.26 from
three brokerage accounts, asserting that this property is subject
to civil forfeiture.
(Docket No. 1.)
According to the United
States, Guiñazú committed wire fraud and laundered money on behalf
of clients in “high risk” jurisdictions.
Id. at p. 2.
Commission
of the wire fraud and money laundering offenses required access to
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 2 of 35
Civil No. 19-1236 (FAB)
the
“U.S.
financial
2
system,”
[Guiñazú’s] business model.”
a
“critical
Id. at pp. 2—3.
[component]
of
By submitting false
information to correspondent financial institutions, Guiñazú and
his former wife, Amelia Shuford (“Shuford”), channeled funds from
client accounts to the United States through the Federal Reserve
Bank. 1
A.
Federal Reserve Banks, Master Accounts and Fedwire
Congress enacted the Federal Reserve Act in 1913 to
“provide for the establishment of Federal Reserve Banks, to furnish
an elastic currency, and to afford means of discounting commercial
paper to establish a more effective supervision of banking in the
United States.”
63 P.L. 43, 38 Stat. 261 (1913); see TNB USA Inc.
v. FRB of N.Y., Case No. 18-7978, 2020 U.S. Dist. 62676 at *1-2
(S.D.N.Y. Mar. 25, 2020) (“The Federal Reserve System is the
Nation’s central bank. It consists of twelve Federal Reserve banks
across the country.”). 2
nation’s
monetary
Federal Reserve Banks “[conduct] the
policy”
and
“[provide]
services to depository institutions.”
certain
financial
Federal Reserve System
1
A correspondent financial institution, also referred to as a “correspondent
banking relationship,” “[m]eans any formal banking or business relationship
established by a bank to provide regular services, dealings, and other financial
transactions.” 31 C.F.R. §§ 1010.605(c) and (d). Essentially, a correspondent
bank “holds one or more correspondent accounts for a member bank for the deposit
or placement of funds.” Correspondent Accounts, 3 Banking Law § 78.11 (2020).
2
The Federal Reserve Bank of New York is responsible for “all of New York,
Puerto Rico, the United States Virgin Islands, and parts of New Jersey and
Connecticut.” Fasano v. FRB, 457 F.3d 274, 278 (3d Cir. 2006).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 3 of 35
Civil No. 19-1236 (FAB)
Publication,
Roles
and
3
Responsibilities
of
Federal
Reserve
Directors, p. 17 (available at https://www.federalreserve.gov/publ
ications.htm.) (last visited July 9, 2020); see 12 U.S.C. § 225.
The Federal Reserve Wire Transfer Network (“Fedwire”) is
a
financial
nationwide
service
offered
electronic
by
network
the
Federal
linking
Reserve
Bank,
approximately
“a
7,000
depository financial institutions (banks) throughout the United
States . . . through which trillions of dollars are transferred
each day.” Fund Transfers Made Through Fedwire Funds Service, 1
The Law of Electronic Transfers § 3.04 (2019); see 12 C.F.R. §
210.26 (defining Fedwire as “the funds transfer system owned and
operated by the Federal Reserve Banks . . . for the transmission
and settlement of payment offers”).
Consumer banks utilize Fedwire to transfer funds from
one master account to another pursuant to a volume-based pricing
structure. 3
banks.
“A master account is, put simply, a bank account for
It gives the depository institutions access to the Federal
Reserve
system.”
System’s
services,
including
its
electronic
payments
Fourth Corner Credit Union v. FRB, 861 F.3d 1052, 1053
(10th Cir. 2017); see 31 C.F.R. § 240.2 (“Master Account means the
3
The Federal Reserve Bank charges, among other costs, a $95 monthly
participation fee to transmit funds via Fedwire.
See Fedwire Funds Service
2020 Fee Schedules (available at https://www.frbservices.org/resources/fees/wir
e-2020.htlm) (last visited July 9, 2020).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 4 of 35
Civil No. 19-1236 (FAB)
4
record of financial rights and obligations of an account holder at
the Federal Reserve Bank with respect to each other, where opening,
intraday, and closing balances are determined.”).
Fedwire is
available only to “consumer banks with an account at a Federal
Reserve Bank.”
Organization JD Ltda. v. United States DOJ, Case
No. 92-3690, 1996 U.S. Dist. LEXIS 4347 at *4 (E.D.N.Y. Apr. 2,
1996).
Generally, wire transfers “are conducted through banks on
their own behalf or on the behalf of other financial service
institutions and corporate and consumer bank customers.”
High
Risk Activity, 2 Compliance Officers Mgmt. Manual § 24.24 (2020).
B.
The Relevant Parties and Financial Institutions 4
Guiñazú is the president and majority shareholder of MCS
International
Bank
Inc.
(“MCS”)
and
Foreign
Exchange
Bank,
exercising “complete, unfettered control over” both organizations.
(Docket No. 18 at p. 5.)
at both institutions.
MCS
is
an
Shuford served on the board of directors
Id. at p. 6.
international
financial
services
entity
(“IFSE”) incorporated in the U.S. Virgin Islands and regulated by
the Office of the Lieutenant Governor, Division of Banking and
4
The Court accepts the following facts as true, as pled in the verified amended
complaint. Assured Guar. Corp. v. García-Padilla, 214 F. Supp. 3d 117, 122
(D.P.R. 2016) (Besosa, J.) (when analyzing 12(b)(6) motions, “the Court accepts
a complaint’s well-pled facts as true and views them – and the inferences drawn
from them – in a light most favorable to the pleader”).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 5 of 35
Civil No. 19-1236 (FAB)
5
Insurance. Id. at p. 5. 5 Foreign Exchange Bank is an international
financial
entity
regulated
by
Institutions.
(“IFE”),
incorporated
of
the
in
Puerto
Commissioner
of
Rico
and
the
Office
Financial
Id. 6
Neither MCS nor Foreign Exchange Bank “had a
master account at a Federal Reserve Bank [or could send] wire
transfers without using a correspondent bank account.”
Id.
Cooperative A is a financial institution in San Juan,
Puerto Rico, a master account holder with access to Fedwire.
at p. 6.
Id.
Financial Institution #1 is located in North Carolina,
“had a master account at a Federal Reserve Bank, and could send
and receive wire transfers.”
Id. at p. 6. Financial Institution
#2 is located in the U.S. Virgin Islands.
Id. at p. 7.
Unlike
Cooperative A and Financial Institution #1, Financial Institution
#2 “did not have a master account at a Federal Reserve Bank.”
Id.
5
An IFSE is “any person, other than an individual, incorporated or organized
under the laws of the Virgin Islands, the United States, or a foreign country,
or a unit of such person, to which a license has been issued . . . [including]
international banking entities licensed before December 14, 2016.” V.I. Code
tit. 9, § 716 (2019).
6
An IFE is “any person, other than an individual, incorporated or organized
under the laws of Puerto Rico, the United States, or a foreign country, or a
unit of such person, to which a license has been issued pursuant to Section 8
of “the International Financial Center Regulatory Act (“Act 273”)].” P.R. Laws
Ann. tit 7, § 3081. Act 273 sets forth incentives to conduct business in Puerto
Rico, such as a municipal license tax exemption for duly licensed IFE’s. Id.
§ 3101.
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 6 of 35
Civil No. 19-1236 (FAB)
C.
6
MCS Transferred Client Funds from Foreign Countries to
the United States
Guiñazú opened a correspondent bank account at Financial
Institution #2 and Cooperative A on behalf of MCS in 2015 and 2016,
respectively. Id at p. 7. During the application process, Guiñazú
submitted
false
statements
fraudulent scheme.”
to
Cooperative
Id. at pp. 7—8.
A
“as
part
of
a
For instance, he falsely
claimed that Person #1 served as the chief compliance officer for
MCS.
Id. at p. 8. 7
Cooperative A approved Guiñazú and Shuford’s
account application based on this misrepresentation.
Clients
account.
Id.
transferred
funds
to
the
MCS
Id.
operational
To wire funds elsewhere, clients “contact[ed] MCS,
not Cooperative A, with wire instructions.”
Id.
Subsequently,
MCS instructed Cooperative A to perform the wire transfer.
Id.
By acting as an intermediary between MCS and Cooperative A, Guiñazú
and Shuford concealed the source of client funds and “limited
potential scrutiny” regarding Bank Secrecy Act and anti-money
laundering regulations.
Id.
From September 2017 to August 2017,
MCS deposited $38,941,928.53 and withdrew $36,630,117.96 from the
Cooperative
7
A
account.
Id.
at
p.
9.
Cooperative
A
wired
The Bank Secrecy Act (“BSA”) requires financial institutions to implement
anti-money laundering programs, including the issuance of “certain reports”
relevant to “criminal, tax, or regulatory investigations or proceedings.” 31
U.S.C. § 5311.
Pursuant to the BSA and appurtenant regulations, banks must
“[d]esignate an individual or individuals responsible for coordinating and
monitoring day-to-day compliance.” Cal. Pack. Bank v. FDIC, 885 F.3d 560, 578
(9th Cir. 2018) (quoting 12 C.F.R. § 326.8(c)(3)).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 7 of 35
Civil No. 19-1236 (FAB)
7
approximately $13,683,527.46 to Switzerland, Argentina, Bolivia,
Panamá, the Dominican Republic, Canada, Great Britain, México,
Malaysia, Perú, Uruguay, Spain and businesses “owned or affiliated
with other members of Guiñazú’s family” on behalf of MCS.
Id.
But for the fraudulent scheme “to obtain the MCS Operational
Account at Cooperative A, Guiñazú and MCS could not have reliably
engaged in its business, which consisted of executing a large
volume of wire transfers.”
D.
Id.
Diversion of “Illicit Proceeds”
Guiñazú diverted funds from the Cooperative A account to
satisfy membership and wire-transfer fees, constituting “illicit
proceeds of wire fraud.”
Id. at p. 10.
The United States alleges
that “Guiñazú siphoned a total of approximately $6,732,403.37.”
Id. at p. 10.
He then transferred approximately $1,400,000.00
from the Cooperative A account to Financial Institution #2 “to pay
personal and MCS expenses.”
Id.
Guiñazú, Shuford and MCS opened E*Trade Accounts #1, #2,
and #3 between 2014 and 2017.
Id. at p. 11.
E*Trade, a securities
brokerage firm, “was required to comply with the BSA, had a master
account at a Federal Reserve Bank, and could send and receive wire
transfers.”
requested
(Docket No. 18 at p. 6.)
that
Guiñazú
and
Shuford
An E*Trade representative
provide
a
“corporate
resolution” “signed by all the directors indicating it is okay for
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 8 of 35
Civil No. 19-1236 (FAB)
8
MCS to enter into a fee based professionally managed account
relationship.”
Id.
Guiñazú and Shuford submitted a corporate
resolution that “was false, inaccurate, and misleading in several
ways,” i.e. stating that Person #1 served as the chief compliance
officer and representing “that MCS was regulated by the Federal
Reserve Bank.”
Id.
E*Trade Accounts #1 and #2 “commingled
Guiñazú’s personal funds, MCS and [Foreign Exchange Bank] capital,
illicit proceeds obtained from defrauding E*Trade and Cooperative
A, and MCS client funds.”
Id. at p. 13.
The dividends, interest,
and capital gains acquired from the E*Trade accounts “[paid] MCS
expenses.”
Id.
Cooperative A closed the MCS account on August 14, 2017,
depriving Guiñazú and Shuford of “a reliable way to wire [client
funds].”
account
Id. at p. 14.
on
behalf
Institution #1.
Id.
of
On this same day, Shuford opened an
Foreign
Exchange
Bank
at
Financial
Foreign Exchange Bank “would be taking over
for MCS’s business and clientele,” transitioning operations from
the U.S. Virgin Islands to Puerto Rico.
Id.
Subsequently, the
Foreign Exchange Bank account at Financial Institution #1 received
$2,233,378.53
in
wire
transfers
from
account at Financial Institution #2.
Id.
the
MCS
administrative
These transactions were
“suspicious” because they “lacked an apparent business purpose.”
Id. at p. 15.
Financial Institution #1 requested that Foreign
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 9 of 35
Civil No. 19-1236 (FAB)
Exchange
Bank
9
disclose
its
BSA
and
anti-money
laundering
compliance policies, account statements and identification of its
beneficial
owners.”
Id.
Foreign
Exchange
Bank
purportedly
presented false information, including the misrepresentation that
it held a master account at a Federal Reserve Bank.
Id.
Financial Institution #1 closed the Foreign Exchange Bank account
on August 25, 2017, issuing Shuford a check in the amount of
$2,233,478.53.
Id.
Guiñazú attempted to deposit the check in the
MCS account at E*Trade, but was informed that the instrument “had
to be payable to MCS.”
E*Trade account
holder
Id.
from
Consequently, Guiñazú changed the
MCS
to
Foreign
Exchange
Bank
by
“falsely suggesting that [they] were the same, as opposed to
legally distinct, entities.”
Id. at p. 16.
Four days later,
Shuford “deposited [the check] in E*Trade account #2.”
Id.
Of
this amount, $80,873.71 financed MCS credit card payments, legal
fees, payroll and rent.
E.
Id.
Seizure of the E*Trade Accounts
The United States applied for warrants to seize all funds
and securities in E*Trade accounts #1, #2 and #3, an amount
totaling
$5,066,920.26
(“miscellaneous
dockets”).
See
In
re
Sealed Proceedings, Misc. Nos. 18-MJ-474, 18-MJ-475, 18-MJ-476.
Magistrate Judge Bruce J. McGiverin approved the applications on
March 20, 2018.
Id.
Shortly after the seizure, Guiñazú attempted
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 10 of 35
Civil No. 19-1236 (FAB)
10
to review his portfolio online.
(Docket No. 24, Ex. 7.)
E*Trade
denied access, however, stating that the accounts were “closed.”
Id.
The miscellaneous dockets remain sealed until further order
of this Court.
The United States has not filed a criminal
complaint, nor has the grand jury returned an indictment concerning
the alleged wire fraud and money laundering violations.
A year after federal law enforcement officers executed
the seizure warrants, the United States commenced this action
pursuant
to
the
Civil
Asset
Forfeiture
(“CAFRA”), 18 U.S.C. sections 981 et seq.
Reform
Act
of
(Docket No. 3.)
2000
The
Court granted the United States’ motions to delay notice and
publication on June 11, 2019 and September 6, 2019. (Docket Nos. 8
and 12.)
On October 9, 2019, the United States amended the
verified complaint, sending “direct notice by Certified Mail to
all three known potential claimants in this action.”
No. 19.)
Manual
(Docket
Subsequently, Foreign Exchange Bank, Guiñazú, and José
Guiñazú
asserted
an
interest
in
the
E*Trade
accounts
pursuant to Supplemental Rule for Admiralty or Maritime Claims &
Asset Forfeiture Actions G (“Supplemental Rule G”).
24.) 8
8
The
claimants
move
to
dismiss
the
(Docket No.
verified
amended
See 18 U.S.C. § 983(a)(4)(A) (“In any case in which the Government files in
the appropriate United States district court a complaint for forfeiture of
property, any person claiming an interest in the seized property may file a
claim asserting such person’s interest in the property in the manner set forth
in the Supplemental Rules for Certain Admiralty and Maritime Claims.”).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 11 of 35
Civil No. 19-1236 (FAB)
complaint.
(Docket No. 28.)
claimants replied.
II.
11
The United States responded, and the
(Docket Nos. 34 and 39.)
Standing
As a preliminary matter, Guiñazú, Foreign Exchange Bank, and
José Manuel Guiñazú must demonstrate that they have standing to
intervene in this action. Supp. R. Admin. or Mar. Cl. & Asset
Forfeiture Actions G(8); United States v Cambio Exacto, S.A., 166
F.3d
522,
526
(1st
“threshold
question
forfeiture
actions).
statutory.
court:
Cir.
in
1998)
every
(holding
federal
Standing
is
that
case,”
both
standing
including
constitutional
is
a
civil
and
Constitutional standing “goes to the power of the
the question is whether the parties have presented the
kind of case or controversy that the Constitution allows federal
courts to hear.”
Luitgaren v. Sun Life Assurance Co. of Canada,
765 F.3d 59, 62 (1st Cir. 2014) (citation omitted).
In contrast,
statutory standing “relates to whether the plaintiff has a cause
of action under a particular statute.”
United States v. Catalá,
870 F.3d 6, 10 (1st Cir. 2017) (citation omitted); cf Katz v.
Pershing, LLC, 806 F. Supp. 2d 452, 456 (D. Mass. 2011) (“Unlike
a dismissal for lack of constitutional standing, which should be
granted under Rule 12(b)(1), a dismissal for lack of prudential or
statutory standing is properly granted under Rule 12(b)(6).”)
(citation omitted).
While constitutional standing is mandatory,
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 12 of 35
Civil No. 19-1236 (FAB)
12
“statutory standing is not a perquisite to a court’s power to
adjudicate a case.”
Catalá, 870 F.3d at 10.
Constitutional standing requires an ownership or possessory
interest in the seized property.
United States v. One-Sixth Share
of James J. Bulgerin All Present & Future Proceeds of Mass Millions
Lottery Ticket No. M246233, 326 F.3d 36, 41 (1st Cir. 2013)
(internal
citation
omitted).
“[A]n
allegation
of
ownership,
coupled with some evidence of ownership, is sufficient to establish
constitutional standing to contest a forfeiture.”
v.
United
States
Currency,
(citation omitted).
189
F.3d
28,
35
United States
(1st
Cir.
1999)
Guiñazú, Foreign Exchange Bank, and José
Manuel Guiñazú filed a claim of interest on November 13, 2019.
Docket No. 24, Exs. 3—5 (E*Trade statements corresponding to the
defendant property).
Accordingly, the claimants have established
constitutional standing.
See United States v. $8,440,190.00 in
U.S. Currency, 719 F.3d 49, 65 (1st Cir. 2013) (“At the pleading
stage, standing is not difficult to establish.”) (Howard, C.J.)
(dissenting).
At this juncture, the Court need not determine
whether the claimants have statutory standing.
Catalá, 870 F.3d
at 10 (holding that “an inquiring court may opt, in the interest
of efficiency, to forgo an inquiry into statutory standing and
reject a claim on the merits”) (citing First State Ins. Co. v.
Nat’l Cas. Co., 781 F.3d 7, 10 n.2 (1st Cir. 2017).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 13 of 35
Civil No. 19-1236 (FAB)
13
III. The Civil Asset Forfeiture Reform Act of 2000
Civil forfeiture is an in rem proceeding against real or
personal
property,
litigated
as
“though
[the
conscious instead of inanimate and insentient.”
object]
were
Various Items of
Personal Property v. United States, 282 U.S. 577, 581 (1931).
This legal fiction emanates from pre-colonial common law, where
the instrumentality “that caused the death of a human being – the
ox that gored, the knife that stabbed, or the cart that crushed –
was confiscated as a deodand.”
Charles Doyle, Cong. Research
Serv., 97-139 at 4, Crime and Forfeiture (2015) (citation omitted).
Modern forfeiture is a deterrent, “rendering illegal behavior
unprofitable.”
687 (1974).
Calero v. Pearson Yacht Leasing Co., 416 U.S. 663
The United States Code contains more than one hundred
civil forfeiture statutes.
William Carpenter, Reforming the Civil
Drug Forfeiture Statutes:
Analysis and Recommendations, 67 TEMP.
L. REV. 1087, 1109 (1994).
Because of this sprawling statutory
landscape, “civil forfeiture is a creature unto itself.”
United
States v. One 1987 Jeep Wrangler Auto, 972 F.2d 472, 476 (2d Cir.
1992).
Congress enacted the Civil Asset Forfeiture Reform Act in
2000 to “provide a more just and uniform procedure” for in rem
proceedings.
106 P.L. 185 (2000); see 1 Moore’s Federal Practice
§ 711.04 (noting that the various civil forfeiture statutes set
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 14 of 35
Civil No. 19-1236 (FAB)
forth
separate
14
“procedural
provisions,
which
can
complicate”
litigation). The statute requires the United States to “establish,
by a preponderance of the evidence, that the property is subject
to forfeiture.”
18 U.S.C. § 983(c)(1); see, e.g., United States
v. Approximately 600 Sacks of Green Coffee Beans, 381 F. Supp. 2d
57, 61 (D.P.R. 2005) (noting that “forfeiture of the beans was not
granted until the Government showed by a preponderance of the
evidence that the beans were contraband”) (García, J.).
A.
The Civil Forfeiture Causes of Action:
sections 981(a)(1)(A) and (a)(1)(C)
18
Section
States
981
of
CAFRA
permits
the
United
U.S.C.
to
confiscate property derived from “virtually all serious federal
crimes, and a number of state and foreign crimes as well.”
D.
Cassella,
Expanded
The
Civil
Government
Asset
Forfeiture
Forfeiture
Authority
Reform
and
Act
Strict
Imposed on All Parties, 27 J. LEGIS. 97, 111 (2001).
of
Stefan
2000:
Deadlines
The verified
amended complaint sets forth five causes of action, alleging that
the E*Trade accounts are the proceeds of, and served to, facilitate
a fraudulent scheme to access Fedwire.
(Docket No. 18.)
Counts one and two arise pursuant to 18 U.S.C. section
981(a)(1)(C).
Id.
This provision provides that “any property,
real or personal, which constitutes or is derived from proceeds
traceable to a violation of . . . any specified unlawful activity
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 15 of 35
Civil No. 19-1236 (FAB)
15
(as defined in section 1956(c)(7)) of this title)” is subject to
civil forfeiture.
18 U.S.C § 981(a)(1)(C).
The United States
maintains that the E*Trade accounts are traceable to wire fraud
and conspiracy to commit wire fraud.
Docket No. 18 at pp. 16—18;
see United States v. Carpenter, 941 F.3d 1, 7 (1st Cir. 2019)
(noting that property derived from “mail or wire fraud is subject
to forfeiture to the United States”).
Counts three through five are based on 18 U.S.C. section
981(a)(1)(A).
(Docket No. 18 at pp. 18-21.)
Pursuant to this
provision, any property “involved in a transaction or attempted
transaction in violation of section 1956, 1957 or 1960 of this
title” is “subject to forfeiture to the United States.”
§ 981(a)(1)(A).
18 U.S.C.
The United States avers that the E*Trade accounts
were “involved in” money laundering and conspiracy to launder
money, citing 18 U.S.C. sections 1956(h), 1956(a)(1)(B), and 1957.
(Docket No. 18 at pp. 18-21.)
The money laundering counts impose
an additional requirement on the United States.
CAFRA mandates
that:
[I]f the Government’s theory of forfeiture is that the
property was used to commit or facilitate the commission
of a criminal offense, or was involved in the commission
of a criminal offense, the Government shall establish
that there was a substantial connection between the
property and the offense.
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 16 of 35
Civil No. 19-1236 (FAB)
16
18 U.S.C. § 983(c)(3); see United States v. $890,718.00, 433 F.
Supp. 2d 635, 645-46 (M.D.N.C. 2006) (holding that the substantial
connection standard in section 983 requires more than “incidental
or fortuitous connection to criminal activity”).
IV.
The Heightened Pleading Standard in Civil Forfeiture Actions
The Supplemental Rules for Certain Admiralty or Maritime
Claims and Asset Forfeiture Actions (“Supplemental Rules”) govern
this proceeding.
United States v. López-Burgos, 435 F.3d 1, 2
(1st Cir. 2006); see Supp. R. Admin. or Mar. Cl. & Asset Forfeiture
Actions A (“Federal Rules of Civil Procedure also apply to [in
rem] proceedings except to the extent that they are inconsistent
with
these
Supplemental
Rules.”).
Supplemental
Rule
E(2)(a)
states that:
the complaint shall state the circumstances from which
the claim arises with such particularity that the
defendant or claimant will be able, without moving for
a more definite statement, to commence an investigation
of the facts and to frame a responsive pleading.
Supp. R. Adm. or Mar. Cl. & Asset Forfeiture Actions E(2)(a).
This
pleading standard is higher than the “short and plain statement of
the claim” criteria set forth in Federal Rule of Civil Procedure 8.
United States v. 49,000 Currency, 330 F.3d 371, 375 n.8 (4th Cir.
2003) (holding that “within the context of civil forfeiture, the
Government must do more than simply provide greater detail than it
otherwise would be required to do under [the Federal Rules of Civil
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 17 of 35
Civil No. 19-1236 (FAB)
Procedure]”).
process
17
The Supplement Rules “fortif[y] the procedural due-
protections
against
improper
use
of
[forfeiture]
remedies.” 12 Charles Allen Wright, Federal Practice and Procedure
§3242 (2d ed. 1997).
Congress
promulgated
Supplemental
Rule
G(2)(f)
in
2006,
modifying the standard set forth in Supplemental Rule E(2)(a).
Pursuant to Supplemental Rule G(2)(f), the United States must
“state sufficiently detailed facts to support a reasonable belief
that the government will be able to meet its burden of proof at
trial.”
G(2)(f).
Supp. R. Admin. or Mar. Cl. & Asset Forfeiture Actions
Supplemental Rule G(2)(f) “evolved” from Supplemental
Rule E(2)(a), “[carrying] forfeiture case law forward without
change.”
Id.
Accordingly,
advisory
precedent
committee’s
predating
relevant to the Court’s analysis.
note
the
on
2006
2006
amendments.
amendment
remains
See, e.g., United States v.
Eleven (11) New Util. Vehicles (Model: XXUTV800 – Monster Buggyl
Mfr: Xingyue Group Co.), Case No. 13-1776, 2014 U.S. Dist. LEXIS
124712 at *30 (D.P.R. Sept. 4, 2014) (holding that the “facts
alleged were sufficient to put potential claimants on notice of
the United States’ theory” pursuant to Rule E(2)(a)) (Gelpí, J.);
United States v. $465,789 Seized from Term Life Ins. Policy No. PJ
108002588, 150 F. Supp. 3d 175, 177 (D. Conn. 2015) (citing
Supplemental
Rules
E(2)(a)
and
G(2)(f)).
After
establishing
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 18 of 35
Civil No. 19-1236 (FAB)
18
standing to challenge the forfeiture, claimants may move to dismiss
the in rem proceeding pursuant to Federal Rule of Civil Procedure
12(b) (“Rule 12(b)(6)”).
Supp. R. Admin. or Mar. Cl. & Asset
Forfeiture Actions G(8)(b)(i).
V.
Federal Rule of Civil Procedure 12(b)(6) Standard
Pursuant to Rule 12(b)(6), defendants may move to dismiss an
action for failure to state a claim upon which relief can be
granted.
Fed. R. Civ. P. 12(b)(6).
The Court is “obligated to
view the facts of the complaint in the light most favorable to the
[United States], and to resolve any ambiguities in [its] favor.”
Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 17 (1st Cir. 2011).
The United States may not, however, “seize and continue to hold
property upon conclusory allegations that the defendant property
is forfeitable.”
United States v. 1,399,313.74 in United States
Currency, 591 F. Supp. 2d 365, 369 (S.D.N.Y 2008).
To determine
whether a complaint complies with Supplemental Rules G(2)(f) and
E(2)(a), courts “look to the totality of the evidence.”
United
States v. Funds in the Amount of Thirty-Thousand Six Hundred
Seventy Dollars, 403 F.3d 448, 455 (7th Cir. 2005); United States
v. $12,480 in United States Currency, 510 F. Supp. 2d 167, 172 (D.
Mass. 2007) (dismissing civil forfeiture action based on the
totality of the circumstances).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 19 of 35
Civil No. 19-1236 (FAB)
VI.
19
The Underlying Criminal Violations
Civil forfeiture is contingent on the premise that Guiñazú
and
Shuford
violated
predicate
laundering and wire fraud.
criminal
statutes,
i.e.
money
The claimants’ motion to dismiss is
structured as a hypothetical syllogism: to state a claim for civil
forfeiture, the United States must allege the commission of a
predicate criminal offense; the United States fails to allege a
predicate criminal offense; thus, plaintiff fails to state a civil
forfeiture cause of action.
A.
(Docket No. 28.)
Money Laundering Counts
Counts three, four and five of the verified amended
complaint are based on the Money Laundering Control Act of 1986,
a statue enacted “to detect and punish financial transactions
representing the proceeds of . . . unlawful activity.”
United
States v. Aversa, 984 F.2d 493, 505 (1st Cir. 1993); 18 U.S.C. §§
1956 and 1957. Money laundering is “the process by which criminals
– and, most notably, drug dealers – disguise the origin of money
obtained
illegally
prostitution,
from
investment
activities
fraud,
such
as
drug
dealing,
gambling,
or
racketeering.”
United States v. Lineberry, 702 F.3d 210, 219 (5th Cir. 2012)
(citation omitted).
Section
1956(a)(1)(B)
concerns
the
concealment
or
failure to report “property involved in a financial transaction
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 20 of 35
Civil No. 19-1236 (FAB)
20
[representing] the proceeds of some form of unlawful activity.”
18 U.S.C. § 1956(a)(1)(B).
Section 1957 prohibits individuals
from “knowingly [engaging] or [attempting] to engage in a monetary
transaction in criminally derived property that is of a value
greater
than
activity.”
$10,000
and
is
18 U.S.C. § 1957.
derived
from
specified
unlawful
Lastly, section 1956(h) pertains to
“[a]ny one who conspires to commit” a money laundering offense.
18 U.S.C. § 1956(h).
Accordingly, the United states must allege
the commission of an “unlawful activity” to substantiate the money
laundering causes of action.
See United States v. Burgos, 254
F.3d 8, 14 (1st Cir. 2001) (“Therefore, to convict Burgos of money
laundering, the government had to prove that he attempted to
distribute cocaine to satisfy the specified ‘unlawful activity’
element of the crime.”); United States v. Cruzado-Laureano, 440
F.3d 44, 46 (1st Cir. 2006) (“Money laundering is, generally
speaking, a derivative offense: money needs to be laundered because
it was illegally derived.”) Like the civil forfeiture claim, money
laundering requires a derivative offense.
In this case, the
derivative offense is wire fraud.
B.
Wire Fraud:
The “Specified Unlawful Activity” in the
Money Laundering Counts
The
“classic
money
laundering
case
involves
a
drug
trafficker acting with the complicity of a banker [to deposit drug
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 21 of 35
Civil No. 19-1236 (FAB)
proceeds
at
a
financial
21
institution]
legitimate business transaction.”
under
the
guise
of
a
United States v. Castellini,
392 F.3d 35, 48 (1st Cir. 2004) (citation omitted).
The verified
amended complaint insinuates that the defendant properties stem
from an unspecified criminal venture, predating the alleged wire
fraud.
(Docket No. 18.)
For instance, the United States alleges
that:
(1) Guiñazú transferred funds “on behalf of customers
located in high-risk money laundering jurisdictions in Central and
South America,” (2) “MCS operated out of a studio apartment in the
U.S. Virgin Islands,” and (3) “[s]ome of MCS’s clients were foreign
money service businesses owned by and affiliated with other members
of [his] family.”
Id. at pp. 2 and 9.
The verified amended complaint is devoid of explicit
drug
trafficking
allegations,
however,
predicating
laundering counts on the wire fraud allegations.
the
money
Docket No. 34 at
p. 18; see Carpenter, 941 F.3d at 6 n.3 (“Specified unlawful
activity
under
§
1956(c)(7)
includes
“any
act
or
activity
constituting an offense listed in section 1961(1) of this title,
which includes mail and wire fraud.”).
The following recitation
conveys the United States’ theory of the case.
Clients from Latin America remitted funds to the MCS and
Foreign Exchange Bank accounts in the U.S. Virgin Islands and
Puerto Rico.
(Docket No. 18.)
Guiñazú and Shuford allegedly
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 22 of 35
Civil No. 19-1236 (FAB)
22
committed wire fraud in September of 2016 by submitting false
information to Cooperative A, a financial institution with a master
account at a Federal Reserve Bank and access to Fedwire.
No. 18 at p. 7.)
(Docket
This false information induced Cooperative A to
“open a correspondent account for MCS.”
Id. at pp. 7—8.
MCS
transferred client funds from the Cooperative A account, now
tainted by the commission of wire fraud, to various recipients via
Fedwire.
Id. at p. 9.
Resolution of the Rule 12(b)(6) motion is contingent on
the adequacy of the substantive wire fraud allegations (counts one
and two), and the money laundering allegations for which wire fraud
is the predicate offense (counts three through five).
States
v.
Seward,
272
F.3d
831,
836
(7th
Cir.
See United
2001)
(“The
transaction or transactions that created the criminally derived
proceeds must be distinct from the money-laundering transaction,
because money laundering statutes criminalize ‘transactions in
proceeds,
not
the
transactions
that
create
the
proceeds.”)
(internal citation and quotation omitted).
To sustain a wire fraud cause of action, the verified
amended
complaint
must
allege:
“(1)
a
scheme
to
defraud,
(2) knowing and willful participation in the scheme with the intent
to
defraud;
and
(3)
the
use
of
interstate
or
foreign
wire
communications to further that scheme.” United States v. McLellan,
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 23 of 35
Civil No. 19-1236 (FAB)
23
959 F.3d 442, 469 (1st Cir. 2020) (citation omitted); 18 U.S.C.
§ 1343.
An essential element of wire fraud is the attainment of
money or property.
United States v. McNally, 483 U.S. 350, 360
(1987) (“[W]e read [the mail fraud statute] as limited in scope to
the protection of property rights.”); Kelly v. United States, 140
S. Ct. 1565, 1569 (2020) (vacating a wire fraud conviction in part
because “the realignment of the toll lanes was an exercise of
regulatory power – something that this Court has already held fails
to meet the statute’s property requirement”). 9
The claimants present a tripartite challenge to the
verified amended complaint.
First, claimants contend that the
purported wire fraud “did not result in any financial gain from
the victim.” (Docket No. 28 at p. 14.) According to the claimants,
neither Guiñazú and Shuford “committed a scheme to defraud because
there is not even a single allegation that the misrepresentations
were directed at its clientele” or any financial institution.
Id.
at pp. 14—15. Second, without a predicate offense (i.e. wire fraud
or
drug
trafficking),
the
money
laundering
allegations
are
9 Because wire fraud and mail fraud “share the same language in relevant part,
[courts] apply the same analysis to both sets of offenses.” United State v.
Carpenter, 484 U.S. 19, 25 n.6 (1987); United States v. Tum, 707 F.3d 68, 75
(1st Cir. 2013) (holding that the “elements of [mail fraud] mirror the wirefraud statute in relevant respects, so cases dealing with one statute are
helpful with dealing with the other”). Moreover, “case law interpreting [mail
and wire fraud] should be used to interpret [bank fraud].” United States v.
Steffen, 687 F.3d 1104, 1109 n.3 (8th Cir. 2012); United States v. Doherty, 969
F.2d 425, 429 (7th Cir. 1992) (holding that “‘scheme to defraud’ means the same
thing under §§ 1341, 1343 and 1344”).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 24 of 35
Civil No. 19-1236 (FAB)
deficient.
24
Id. at pp. 16—17.
Third, the CAFRA claims are a
fortiori invalid because the verified amended complaint allegedly
fails to set forth an underlying criminal violation.
C.
The Right to Control as a Property Interest
Guiñazú, Foreign Exchange Bank, and José Manuel Guiñazú
argue that the “alleged misrepresentations did not result in any
financial gain from a victim.”
(Docket No. 28 at p. 13.)
The
United States maintains, however, that “(f)inancial institutions
have the valuable right and interest in controlling the products
and services they offer and to regulate their customers’ use of
those products and services.”
(Docket No. 34 at pp. 9—10.)
The
dispositive inquiry is whether the right to control access to
Fedwire
is
a
cognizable
property
interest
for
purposes
of
establishing wire fraud.
The wire fraud statute protects tangible and intangible
property.
Carpenter v. United States, 484 U.S. 19, 25 (1987)
(holding that “the intangible nature of [confidential business
information] does not make it any less ‘property’ protected by the
mail and wire fraud statutes”).
Not all intangible property,
however, falls within the purview of wire fraud.
See, e.g.,
Cleveland v. United States, 531 U.S. 12, 26-27 (2000) (holding
that a “Louisiana video poker license in the State’s hands is not
‘property’ under § 1341”).
“Property” is traditionally defined as
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 25 of 35
Civil No. 19-1236 (FAB)
25
a “bundle of rights,” including the “right to possess and use, the
right
to
exclude,
Dictionary,
at
and
1410
the
(10th
right
ed.
to
transfer.”
2014);
see
United
Black’s
States
Law
v.
Bucuvalas, 970 F.2d 937, 945 (1st Cir. 1992) (“In the broadest
sense, a ‘property’ interest resides in the holder of any of the
elements comprising the ‘bundle of rights’ essential to the use or
disposition of tangible property or to the exercise or alienation
of an intangible right”) (citation omitted). 10
Exclusivity is “one
of the most essential sticks in the bundle of rights.”
College
Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense. Bd., 527
U.S. 666, 672 (1999).
10
In Bucuvalas, the First Circuit Court of Appeals held that the City of
Boston’s right to issue liquor and entertainment licenses constituted property
within the meaning of the federal fraud statutes.
970 F.2d at 945.
Subsequently, the Supreme Court adopted a divergent position, holding that
“state and municipal licenses in general . . . do not rank as ‘property’ for
purposes of [mail fraud], in the hands of the office licensor.” Cleveland, 531
U.S. at 15. The Cleveland court emphasized that a government issued license is
“purely regulatory” and “cannot be economic.”
Cleveland, 531 U.S. at 357.
The fraud in Cleveland implicated “the Government’s role as a sovereign, not as
a property holder.”
Id. at 24.
Here, the putative victim is a private
institution, not a governmental entity. Accordingly, the regulatory interests
central to the Supreme Court’s analysis in Cleveland are absent from this case.
See In re. Ranbaxy Generic Drug Application Antitrust Litig., Case No. 19-2878,
2019 U.S. Dist. LEXIS 205849 *32 (D. Mass. Nov. 27, 2019) (holding that Cleveland
is distinguishable because the “plaintiffs have alleged that Ranbaxy’s fraud
affected the interests of individuals and entities other than the government”).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 26 of 35
Civil No. 19-1236 (FAB)
26
Courts have placed the “right to control” within the
scope
of
the
Kelerchian,
federal
the
fraud
Seventh
statutes. 11
Circuit
Court
In
of
United
Appeals
States
v.
determined
whether the “right to ensure that [machineguns] were sold in
compliance with federal law” is “property” for purposes of the
mail and wire fraud statutes.
937 F.3d 895 (7th Cir. 2019).
The
defendants in Kelerchian paid full price for federally regulated
firearms,
but
falsely
represented
purchased by a Sheriff’s Department.
that
the
machineguns
Id. at p. 901.
were
Although the
arms dealer in Kelerchian received payment for the machineguns,
“by illegally selling the firearms it opened itself up to risks it
did not bargain for: risks of liability, of increased government
scrutiny, and negative publicity, all of which in turn could
jeopardize future sales.”
Id. at 913.
Deprivation of the right to control “does not render
every transaction induced by deceit actionable under the mail and
wire fraud statutes.”
11
Id. at 912 (citation omitted).
There is a
See United States v. Carlo, 507 F.3d 799, 802 (2d Cir. 2007) (“By causing the
developers to make economic decisions about the validity of their real estate
projects based on misleading information, Carlo harmed the developers’ property
interests.”); United States v. Gray, 405 F.3d 227, 234 (4th Cir. 2005)
(affirming wire fraud conviction, holding that a “property owner has an
intangible right to control the disposition of its assets”); United States v.
Treadwell, 593 F.3d 990, 999 (9th Cir. 2010 ) (affirming wire fraud conviction
because defendants, “through misrepresentation, intentionally deprived their
victims of the opportunity to decide for themselves, on the basis of true and
accurate information, whether or not to invest in companies”); United States v.
Welch, 327 F.3d 1081, 1108 (10th Cir. 2003) (“The Tenth Circuit Court of Appeals
has] recognized the intangible right to control one’s property is a property
interest within the purview of the mail and wire fraud statutes”).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 27 of 35
Civil No. 19-1236 (FAB)
27
“fine line between schemes that do no more than cause their victims
to enter into transactions they would otherwise avoid – which do
not violate the mail or wire fraud statutes – and schemes that
depend for their completion on a misrepresentation of an essential
element of the bargain – which do violate the mail and wire fraud
statutes.”
Id.; compare United States v. Shellef, 507 F.3d 82,
108 (2d Cir. 2007) (dismissing the indictment because the jury
might erroneously convict the defendants for “simple fraudulent
inducements to gain access to [industrial chemicals]”) with United
States v. Schwartz, 924 F.2d 410, 421 (2d Cir. 1991) (affirming
wire
fraud
conviction
where
a
vendor
“sold
its
products
to
appellants only because of their deceit and misrepresentations,
which were offered as consideration for [the vendor] to contract
with them”).
Like
the
right
to
control
access
to
firearms
in
Kelerchian, the right to control access to Fedwire constitutes
“property”
in
the
context
of
wire
fraud.
Cooperative
A
is
“regulated by the Public Corporation for Supervision and Insurance
of Cooperatives of Puerto Rico (“COSSEC”), which requires [it] to
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 28 of 35
Civil No. 19-1236 (FAB)
28
comply with the [Bank Secrecy Act].”
(Docket No. 18 at p. 6.) 12
The false statements that Guiñazú made to Cooperative A pertain to
mandatory BSA and anti-money laundering obligations. Id. at pp. 6—
7.
Just as the illegal sale of machineguns exposed the arms dealer
in Kelerchian to a litany of criminal and financial risks, failure
to
ensure
compliance
Cooperative A.
with
the
BSA
posed
similar
threats
Violations of the BSA may result in criminal
prosecution, including monetary fines and imprisonment.
U.S.C.
§
to
5322.
Foreseeable
consequences
of
a
See 31
criminal
investigation include the loss of good will and future business
opportunities.
A
reasonable
inference,
based
on
these
circumstances, is that Cooperative A would refuse to open an
account for clients who flout federal law.
p. 8.
See Docket No. 18 at
By wielding the authority to approve or reject an account
application, Cooperative A controlled access to Fedwire.
Indeed,
Cooperative A paid a fee to “send and receive payments” via
Fedwire, a service available only to master account holders.
discretion
12
to
exclude
others
from
utilizing
this
The
service
COSSEC, known in Spanish as the Corporación Pública para la Supervisión y
Seguro de Cooperativas de Puerto Rico, is responsible for the “monitoring and
total supervision of cooperative savings and credit unions and their
operations.” P.R. Laws Ann. tit. 7, § 1334. Pursuant to Puerto Rico law, every
cooperative shall comply with “local and federal regulations applicable to their
businesses, services and operations.” Id. at § 1334i.
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 29 of 35
Civil No. 19-1236 (FAB)
29
underscores that the right to control access to Fedwire is a
cognizable property interest.
1.
First Circuit Precedent
In United States v. Kenrick, the First Circuit
Court of Appeals addressed the “‘right to control’ theory” in a
criminal bank fraud action. Case No. 98-1282, 2000 U.S. App. LEXIS
2594 *38.
A bank president concealed his interest in several
properties from the board of directors, the entity responsible for
ratifying and approving bank issued loans.
In the same vein as
Kelerchian, the Kenrick court held that “bank fraud does not mean
that any falsehood told to a bank, or any breach of fiduciary duty
by a bank official with an undisclosed conflict of interest,
constitutes a deprivation of the bank's right to control its
assets.”
Id. at *38.
The First Circuit Court of Appeals relied
on United States v. Neder, specifying that a matter is material
if:
(a) a reasonable man would attach importance to its
existence or non-existence in determining his choice of
action in the transaction in question; or
(b) the maker of the representation knows or has reason
to know that its recipient regards or is likely to regard
the matter as important in determining his choice of
action, although a reasonable man would not so regard
it.
Id. (citing 527 U.S. 1, 22 n.5 (1999)).
The Kenrick court affirmed
the bank fraud convictions because “the evidence showed that the
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 30 of 35
Civil No. 19-1236 (FAB)
[defendant]
deprived
30
[the
bank]
of
its
right
to
control
the
disposition of its property, not only by concealing material
information necessary to make an informed lending decision, but
also by preventing it from making any lending decision at all by
taking the loan without Board approval (and then falsifying bank
records to conceal this fact).”
Id. at *48. 13
The falsehoods perpetuated by Guiñazú and Shuford
persuaded Cooperative A to open an account for MCS, an allegation
that
encapsulates
the
“materiality”
element
of
wire
fraud.
According to the United States, the wire fraud commenced when:
Cooperative A . . . asked MCS to provide its [Bank
Secrecy Act and Anti-Money Laundering] compliance
policies. Guiñazú emailed Cooperative A MCS’s BSA/AML
Policies and Procedures (the “Compliance Manual”), which
also contained false statements, including falsely
identifying Person #1 as MCS’s Chief Compliance Officer.
The Compliance Manual also displayed Person #1’s digital
signature, which Person #1 did not authorize Guiñazú to
use. Cooperative A, relying on the false, inaccurate,
and misleading statements and information that Guiñazú
provided, opened a correspondent account for MCS. Both
Shuford and Guiñazú appear to have signed the accountopening documents.
(Docket No. 18 at p. 8.)
Just as the bank president in Kenrick
concealed a potential conflict of interest, Guiñazú and Shuford
withheld truthful and accurate information from Cooperative A.
13
Sitting en banc, the First Circuit Court of Appeals subsequently affirmed the
bank fraud convictions for a second time. United States v. Kenrick, 221 F.3d
19 (2000) (abrogated on other grounds by Loughrin v. United States, 573 U.S.
351 (2014)).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 31 of 35
Civil No. 19-1236 (FAB)
31
That the bank president acquired a loan, while Guiñazú and Shuford
obtained
access
to
Fedwire
is
insignificant.
Fedwire
is
an
exclusive service, a benefit offered to clients at the discretion
of Cooperative A.
This assessment is equally applicable to a bank
loan.
Ultimately, the right to control access to Fedwire
is “property” for purposes of the wire fraud statute.
No. 28.)
(Docket
This broad interpretation of “property” comports with
federal wire and mail fraud jurisprudence.
See United States v.
Sidoo, Case No. 19-1008, 2020 U.S. Dist. Lexis 110148 (D. Mass.
June
23,
2020)
universities
are
(“This
Court
property
holds
interests
that
application
owned
by
the
slots
to
university
cognizable under the mail and wire fraud statutes.”). 14
Because
the United States has stated “sufficiently detailed facts to
support a reasonable belief that the government will be able to
14
See also United States v. Billmyer, Case No. 94-029, 1995 U.S. Dist. LEXIS
385 *20 (D.N.H. Jan. 5, 1995) (holding that a car dealership “had a property
right or interest in awarding Letters of Intent” pursuant to the federal fraud
statutes); United States v. Theodore, Case No. 87-301, 1999 U.S. Dist. LEXIS
16830 at *10 (D. Mass. Oct. 21, 1999) (“By causing the fraudulent issuance of
a medical license, Petitioner deprived the Commonwealth of this authority and
control, and thus of a property right.”); United States v. Sorich, 523 F.3d
702, 713 (7th Cir. 2008) (holding that “jobs are property for purposes of mail
fraud, and that the indictment sufficiently alleged a deprivation of property”);
United States v. Kernell, Case No. 08-142, 2010 U.S. Dist. LEXIS 36477 *9 (E.D.
Tenn. Mar. 17, 2010) (holding that “information data and pictures in Governor
Palin’s email account” qualified as “property” pursuant to the mail and wire
fraud statutes); United States v. Titlayo Akintomide Akinyoyenu, 201 F. Supp.
3d 82, 86 (D.D.C. 2016) (noting that “it is well recognized that prosecutors
may charge a ‘right to control’ theory of mail (and wire) fraud”) (citing
cases).
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 32 of 35
Civil No. 19-1236 (FAB)
32
meet its burden of proof at trial,” the claimant’s motion to
dismiss is DENIED.
Supp. R. Admin. or Mar. Cl. & Asset Forfeiture
Actions G(2)(f).
VII. Intent to Defraud
Guiñazú,
contend
that
Foreign
the
Exchange
verified
Bank,
amended
and
José
complaint
Manuel
fails
to
“specific intent to defraud any financial institutions.”
No. 28 at p. 15.)
Guiñazú
allege
(Docket
The intent to defraud “may be established by
circumstantial evidence and examination of the scheme itself.”
United States v. Hoen Seok Lee, 937 F.3d 797, 811 (7th Cir. 2019).
Whether or not Guiñazú and Shuford possessed the requisite intent
to defraud is a question of fact for the jury to decide.
See
United States v. Reaume, 338 F.3d 577, 583 (6th Cir. 2003).
The
verified
complaint
“contains
enough
information
that
[the
claimants] can understand the theory of forfeiture, begin an
investigation, and file a response.”
United States v. $49,400 in
United States Currency at Logan Airport, Case No. 18-12233, 2019
U.S.
Dist.
LEXIS
45002
at
*7
(D.
Mass.
Mar.
19,
2019).
Consequently, the lack of intent argument is unpersuasive.
VIII. Traceability
The claimants assert that the United States failed to allege
that “there is a substantial connection between the property sought
to be forfeited and any unlawful activity, as required by [section
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 33 of 35
Civil No. 19-1236 (FAB)
983] of CAFRA.”
33
(Docket No. 28 at p. 23.)
The United States
avers, however, that Guiñazú “transferred the illicit proceeds
from the MCS Operational Account [at Cooperative A] to accounts in
the name of MCS that he established at E*Trade.”
at p. 11.)
(Docket No. 18
The Cooperative A account allegedly contained the
“illicit proceeds of wire fraud in violation of 18 U.S.C. §§ 1343
and 1349.”
A
Id. at p. 10.
motion
to
dismiss
challenges
pleadings, not “proof at trial.”
the
sufficiency
of
the
United States v. All Funds on
Deposit in Dime Sav. Bank of Williamsburg Account, 255 F. Supp. 2d
56,
68
(E.D.N.Y.
2003)
(“[T]he
court
need
not
pass
on
the
government’s ultimate burden of proof regarding traceability.
The
only question [presented by a motion to dismiss] is whether the
proposed
Amended
Complaint
describes
sufficiently
circumstances from which the claims arise.’”).
“is
not
required
activity
to
to
prove
demonstrate
money
full
The United States
tracing
laundering,”
‘the
because
of
all
“the
account
pleading
standard for tracing funds in a civil forfeiture complaint is not
exacting.”
United
States
v.
All
Assets
Held
No. 80020796, 83 F. Supp. 3d 360, 314 (D.D.C. 2015).
in
Account
Accordingly,
the verified amended complaint sufficiently places claimants on
notice that the E*Trade accounts are traceable to the Cooperative
A account.
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 34 of 35
Civil No. 19-1236 (FAB)
IX.
34
The Excessive Fines Clause of the Eighth Amendment
The final argument set forth in support of the motion to
dismiss pertains to the Eighth Amendment of the United States
Constitution, which provides that “[e]xcessive bail shall not be
required, nor excessive fines imposed, nor cruel and unusual
punishment inflicted.”
CONST. amend. VIII).
Docket No. 28 at pp. 25—27 (citing U.S.
According to the claimants, “the attempted
forfeiture of over five million dollars is grossly disproportional
to the gravity of the alleged offense.”
Id. at p. 21.
Pursuant
to Supplemental Rule G(8)(e), the claimants:
may seek to mitigate a forfeiture action under the
Excessive Fines Clause of the Eighth Amendment by motion
for summary judgment or after entry of a forfeiture
judgment if:
(i)
the claimant has pleaded the defense under Rule
8; and
(ii)
the parties have had the opportunity to conduct
civil discovery on the defense.
Supp. R. Admin. or Mar. Cl. & Asset Forfeiture Actions G(8)(e).
Pursuant
to
Supplemental
Rule
G(8)(e),
the
claimants’
Eighth
Amendment claim is “premature.” United States v. $22,361.83 United
States Funds Seized from Various Accounts, Case No. 11-317, 2012
U.S. Dist. LEXIS 72166 at *10 (E.D. Wash. May 23, 2012) (holding
that the “Court must make [the excessive fine] determination after
determining
whether
forfeiture
of
the
seized
assets
is
Case 3:19-cv-01236-FAB Document 45 Filed 07/09/20 Page 35 of 35
Civil No. 19-1236 (FAB)
35
appropriate”); see United States v. 424 Main St., 862 F. Supp. 2d
24,
35—36
(D.
proportionality
appropriate
for
Mass.
have
this
2012)
yet
to
court
(“Because
be
to
the
developed,
resolve
the
facts
it
relating
would
Claimant’s
not
to
be
Eighth
Amendment claim at this time.”).
X.
Conclusion
For the reasons set forth above, the Guiñazú, Foreign Exchange
Bank, and José Manuel Guiñazú’s motion to dismiss is DENIED.
(Docket No. 28.)
IT IS SO ORDERED.
San Juan, Puerto Rico, July 9, 2020.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE
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?