UNITED STATES OF AMERICA v. Real Property Known As 615 Elmhurst, Sugar Land, Texas 77479

Filing 22

ORDER ADOPTING MEMORANDUM AND RECOMMENDATION re: 3 MOTION to Dismiss , 6 Memorandum and Recommendations (Signed by Judge Nelva Gonzales Ramos) Parties notified.(amireles, 2)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
UNITED STATES OF AMERICA,
VS.
REAL PROPERTY KNOWN AS 615
ELMHURST, SUGAR LAND, TEXAS
77479, et al,
Defendants.

August 02, 2018
David J. Bradley, Clerk

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§ CIVIL ACTION NO. 2:18-CV-5
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ORDER ADOPTING MAGISTRATE JUDGE’S
MEMORANDUM AND RECOMMENDATION
On January 5, 2018, Plaintiff United States of America (the “Government”) filed a
verified Complaint for Forfeiture in Rem against Real Property known as 615 Elmhurst,
Sugar Land, Texas, 77479 (the “Defendant Property”), alleging that the Defendant
Property is subject to forfeiture because it was derived from or traceable to proceeds from
the theft of funds from the Mexican State of Tabasco and because it was involved in a
money laundering offense with such proceeds. On February 7, 2018, Jose Manuel Saiz
Pineda (Saiz Pineda) filed a claim to the Defendant Property on behalf of himself and
Phantom International Investments, LLC (“Phantom”) (collectively “Claimants”).
Pending before the Court is Claimants’ Motion to Dismiss. D.E. 3. On April 4,
2018, United States Magistrate Judge Jason B. Libby submitted a Memorandum and
Recommendation (M&R) to Deny Claimants’ Motion to Dismiss. D.E. 6. Claimants filed
their timely objections on April 18, 2018 (D.E. 10), to which the Government responded

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(D.E. 13) and Claimants replied (D.E. 18). Claimants’ objections are set out and
discussed below.
I. Legal Standard
A district court that refers a case to a magistrate judge must review de novo any
portions of the magistrate judge’s proposed findings and recommendations on dispositive
matters to which the parties have filed specific, written objections. FED. R. CIV. P. 72(b).
The district court may accept, reject, or modify, in whole or in part, those portions of the
proposed findings and recommendations. Id. With respect to non-dispositive matters, the
district court must consider timely objections and modify or set aside any part of the
order that is clearly erroneous or is contrary to law. FED. R. CIV. P. 72(a).
II. Analysis
A. Motion to Dismiss Standard
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotations omitted).
Supplemental Admiralty and Maritime Claims Rule G(2) requires, among other things,
that a complaint state sufficiently detailed facts to support a reasonable belief that the
government will be able to meet its burden of proof at trial. SUPP. RULE (G)(2)(f). A
complaint can withstand a motion to dismiss if it alleges “facts sufficient to support a
reasonable belief that the property [in question] is subject to forfeiture.” United States v.
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$79,650 Seized from Bank of America Account Ending in –8247, in name of Afework,
2009 WL 331294, at *5 (E.D. Va. Feb. 9, 2009) (quoting United States v. Mondragon,
313 F.3d 862, 865–66 (4th Cir. 2002)). The pleading requirements of Rule (G)(2) are
satisfied if the government pleads enough facts to support a reasonable belief that it will
be able to meet its burden of proof at trial; the government is not required to prove its
case simply to get into the courthouse door. United States v. All Right, Title & Interest in
the Real Prop. & Appurtenances Located at 641 E Stadium Beach Rd. W, Grapeview,
Washington 98546, with all Improvements and Attachments Thereon, 2015 WL
12748176, at *5 (W.D. Tex. Mar. 24, 2015).
‘“There is no requirement that all of the facts and evidence at the government’s
disposal be pled in the complaint; the government must simply plead enough specific
facts for the claimant to understand the government’s theory, file a responsive pleading
and undertake her own investigation.’” United States v. $109,086.00, 2005 WL 1923613,
at *3 (S.D. Tex. Aug. 10, 2005) (quoting United States v. All Funds on Deposit in Dime
Sav. Bank of Williamsburg Account No. 58-400738-1, 255 F. Supp. 2d 56, 69 (E.D.N.Y.
2003)) (emphasis in Dime Sav. Bank) (internal alteration omitted); see also United States
v. $74,500 in U.S. Currency, 2011 WL 2712604, at *2 (D. Md. July 11, 2011) (“[T]he
Government need not produce all evidence that will be introduced at trial and may
instead ‘gather [ ] evidence after the filing of a Complaint for forfeiture to establish, by a
preponderance of the evidence, that [the] property is subject to forfeiture.’” (quoting 18
U.S.C. § 983(c)(2))).

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B.

Objection 1: The M&R is not consistent with Fifth Circuit Law.

Claimants first argue that the M&R is inconsistent with Fifth Circuit law because
the M&R does not require the Government to allege specifically that the Defendant
Property is “traceable” to criminal proceeds or to tainted property used to facilitate a
criminal offense. Claimants further argue that the M&R erroneously concludes that the
traceability requirement can be met by circumstantial facts, including Saiz Pineda’s
government salary and Jose Latour’s trial testimony regarding the use of an LLC to buy
the Defendant Property.
The only Fifth Circuit case cited in Claimants’ objections is United States v.
Tencer, 107 F.3d 1120, 1134 (5th Cir. 1997) (“[M]erely pooling tainted and untainted
funds in an account does not, without more, render that account subject to forfeiture.”).
However, as the Government correctly points out, Tencer has nothing to do with pleading
requirements or the sufficiency of a civil forfeiture complaint. Tencer addressed the
Government’s burden in a criminal trial—specifically whether there was sufficient
evidence to support the jury’s special forfeiture verdict—and concluded that “the jury
was entitled to infer that all of the funds in the account were ‘involved in’ the money
laundering and subject to forfeiture pursuant to § 982.” Id. at 1135.
Other cases quoted and/or cited by Claimants in their motion to dismiss and reply
brief similarly do not support Claimants’ assertion that the Government is required to
show tracing in its complaint. For example, Claimants state that, “[a]t a minimum, a
forfeiture complaint must ‘allege that at least some of the property can be traced.’” D.E.
18, p. 2 (quoting 641 E Stadium Beach Rd. W., 2015 WL 12748176, at *6). However, that
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case actually says, “The Government’s burden at the pleadings stage is merely to allege
that at least some of the property can be traced or is substantially connected to illegal
proceeds.” 641 E Stadium Beach Rd. W., 2015 WL 12748176 at *6 (emphasis added).
Claimants also argue that “Courts thus ‘routinely’ dismiss complaints which fail to allege
tracing.” D.E. 18, p. 2 (quoting United States v. $80,760.00 in U.S. Currency, 781 F.
Supp. 462, 467 n.14 (N.D. Tex. 1991)). That cited language actually says, “Courts
routinely recognize challenges to the forfeiture complaint and demand that the complaint
allege sufficiently particular facts to establish a reasonable belief that the property is
forfeitable.” $80,760.00, 781 F. Supp. at 467. Simply put, “tracing is not an issue at the
motion to dismiss stage.” United States v. Aguilar, 782 F.3d 1101, 1109 (9th Cir. 2015).
Moreover, the Government is proceeding under three theories of forfeiture: (1)
Defendant Property was involved in a money laundering transaction or attempted money
laundering transaction; (2) Defendant Property was derived from or traceable to a felony
offense against the country of Mexico, that is, misappropriation, theft, or embezzlement
of public funds by or for the benefit of a public official; and/or (3) Defendant Property
constitutes or is derived from proceeds traceable to an offense constituting a “specified
unlawful activity.” Compl. ¶ 1. Even if tracing were required under some circumstances,
because the Government has pled alternative theories supporting forfeiture, it may meet
its pleading burden by setting forth facts showing a reasonable belief that Defendant
Property was “involved in” money laundering. See 641 E Stadium Beach Rd. W., 2015
WL 12748176, at *5.

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The M&R concluded that the following factual allegations, in the aggregate,
establish a reasonable belief that the Government will be able to meet its burden of proof
at trial that the Defendant Property is subject to forfeiture:
At a minimum, the Government has set forth facts indicating
Saiz Pineda was the Secretary of Administration and Finance
for the Mexican State of Tabasco. The Tabasco Attorney
General’s office has determined the equivalent of
approximately $190 million of state funds are missing from
Claimant Saiz Pineda’s tenure. Claimant Saiz Pineda has been
charged criminally by the Mexican authorities with illegal
enrichment. Claimant Saiz Pineda has also been indicted in
the Southern District of Texas for related offenses. The
verified complaint alleges Saiz Pineda created shell
companies and wire transferred significant amounts of money
from Mexico into these companies. Claimant Phantom is one
of these companies. Phantom purchased the defendant
property for $1,328,612.00 in cash. Latour, the manager of
Phantom, testified at trial that the real owner of the property
is Saiz Pineda and [his wife] Ms. Perez Ceballos and that
Phantom was used to hide their identities. Additionally, the
purchase of defendant property was just one of several
transactions where Saiz Pineda purchased properties in New
York, California and Florida. Saiz Pineda’s government
salary during the relevant time was the equivalent of $80,000.
The Government’s case is premised in part on Claimant Saiz
Pineda living outside his means. Claimant Saiz Pineda’s wife
was living in defendant property yet claimed not to be the
owner.
D.E. 9, pp. 8–9.
The Court agrees that the Government’s factual allegations are sufficient under
both Rule 12(b)(6) and Supplemental Rule G because they allow the Court to draw the
reasonable inference that the Defendant Property has a substantial connection to illegal
activity. Even if no one fact in isolation establishes this connection, the aforementioned
facts, in the aggregate, form the basis for the reasonable belief that the Government will
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introduce evidence on these points after discovery. See United States v. All Funds on
Deposit at Old Mut. of Bermuda Ltd. Contract No. CX4011696 in Bermuda, 2014 WL
4101215, at *2 (S.D. Tex. Aug. 18, 2014); see also United States v. Funds in the Amount
of $33,534.93, 2013 WL 12333983, at *5 (D.N.M. Mar. 25, 2013) (“The Court is allowed
to rely upon circumstantial allegations and inferences, when evaluating the sufficiency of
the complaint.”). Moreover, the Government is not required to prove its entire case at the
pleading stage and can maintain its complaint without conclusively establishing that the
Defendant Property was involved in money laundering and/or purchased using funds
stolen from the State of Tabasco. That is a burden reserved for trial; at this stage of the
proceedings, the Court is charged with the task of evaluating the sufficiency of the
complaint, not with deciding the merits. See Triad Associates Inc., 892 F.2d at 586.
For these reasons, Claimants’ first objection is OVERRULED.
B. Objection 2: The M&R’s reliance on Latour’s trial testimony is misplaced.
Claimants further object to the M&R’s reliance on Latour’s testimony from the
criminal trial of Saiz Pineda’s wife, Perez-Ceballos, because Latour did not testify that
the funds used to purchase the Defendant Property were traceable to any criminal
activity. According to Claimants, Latour’s testimony cannot support a reasonable belief
that the Government can satisfy its burden to prove at trial that the Defendant Property is
subject to forfeiture because Perez-Ceballos was acquitted of money laundering
conspiracy.
As set forth supra, there is no traceability requirement at this stage. Furthermore,
unlike at Perez-Ceballos’ criminal trial, the Government need not prove beyond a
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reasonable doubt that Perez-Ceballos conspired to commit money laundering in this civil
forfeiture case; the Government need only prove by a preponderance of the evidence that
the Defendant Property was involved in money laundering and/or purchased using funds
stolen from the government of Tabasco. See 18 U.S.C. § 983(c)(1) (“[T]he burden of
proof is on the Government to establish, by a preponderance of the evidence, that the
property is subject to forfeiture.”); United States v. Thibault, 897 F. Supp. 495, 498 (D.
Colo. 1995) (“Because a civil forfeiture is in rem, the elements of a claim establishing
forfeiture focus on the property’s role in the offense and not on the owner’s conduct.”).
The fact that a jury previously acquitted Perez-Ceballos of money laundering conspiracy
does not mean that the Government cannot prove that the Defendant Property was
involved in money laundering or derived from proceeds from the theft of state funds. See
United States v. $22,173.00 in U.S. Currency, 716 F. Supp. 2d 245, 252 (S.D.N.Y. 2010)
(“However, because civil forfeiture actions require proof by a preponderance of the
evidence, while criminal prosecutions require proof beyond a reasonable doubt, acquittal
of criminal charges does not preclude success in a related civil forfeiture proceeding.”)
(internal citations omitted); see also United States v. 1988 Oldsmobile Cutlass Supreme,
983 F.2d 670, 675 (5th Cir. 1993). Thus, the M&R did not err in relying upon Latour’s
trial testimony or other factual allegations stemming from Perez-Ceballos’ criminal trial
when evaluating the Government’s complaint.
For these reasons, Claimants’ second objection is OVERRULED.

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III. Conclusion
Having reviewed the findings of fact, conclusions of law, and recommendations
set forth in the Magistrate Judge’s Memorandum and Recommendation, as well as
Claimants’ objections, the Government’s response, Claimants’ reply, and all other
relevant documents in the record, and having made a de novo disposition of the portions
of the M&R to which objections were specifically directed, the Court OVERRULES
Claimants’ objections and ADOPTS as its own the findings and conclusions of the
Magistrate Judge. Accordingly, Claimants’ Motion to Dismiss (D.E. 3) is DENIED.
ORDERED this 1st day of August, 2018.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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