17 F.Supp.2d 161 (E.D.N.Y. 1998), CV 91-0234, United States v. Funds Held in Name or For Benefit of Wetterer

Docket Nº:CV 91-0234(ADS).
Citation:17 F.Supp.2d 161
Party Name:UNITED STATES of America, Plaintiff, v. FUNDS HELD IN THE NAME OR FOR THE BENEFIT OF John Hugh WETTERER, and/or Asociacion Amigos Del Los Ninos Hogar Mi Casa, a/k/a Mi Casa, at Bank International and Sterling Bank, including but not limited to Bank of America Account Numbers IF 1119-9984, 162232 IBF, 10201-01-1, and B-58-05616, Lloyds Bank Internat
Case Date:September 30, 1998
Court:United States District Courts, 2nd Circuit, Eastern District of New York

Page 161

17 F.Supp.2d 161 (E.D.N.Y. 1998)

UNITED STATES of America, Plaintiff,

v.

FUNDS HELD IN THE NAME OR FOR THE BENEFIT OF John Hugh WETTERER, and/or Asociacion Amigos Del Los Ninos Hogar Mi Casa, a/k/a Mi Casa, at Bank International and Sterling Bank, including but not limited to Bank of America Account Numbers IF 1119-9984, 162232 IBF, 10201-01-1, and B-58-05616, Lloyds Bank International Bank Number 00070891 (Nassau Branch) and Sterling Bank Account Numbers 907-103 and CD 15590 and all related accounts and funds, Defendants.

No. CV 91-0234(ADS).

United States District Court, E.D. New York.

Sept. 30, 1998

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[Copyrighted Material Omitted]

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Zachary W. Carter, United States Attorney, Eastern District of New York, Brooklyn, New York by Susan L. Riley, Arthur P. Hui, Assistant U.S. Attorneys, for plaintiff.

June Resnick German, Stanley L. Shapiro, Huntington, New York, for defendants and claimants.

MEMORANDUM DECISION AND ORDER

SPATT, District Judge.

This may be the final chapter--at least at the trial level--of the continuing Wetterer saga, which has gone on for almost ten years and traversed two continents.

It is a disturbing tale. In the 1970's, Wetterer, a United States citizen and veteran of the Vietnam War, settled--permanently, as it turned out--in Guatemala, where he founded an orphanage for homeless boys called "Mi Casa." From then to the present, Wetterer has been Mi Casa's director, organizer and policy-maker. In this capacity, Wetterer mailed newsletters to potential donors in the United States and abroad in an effort to raise funds for the Mi Casa orphanage. These newsletters painted a glowing portrait of Mi Casa as a wholesome, safe and secure environment for the boys in Wetterer's care. In reality, however, Wetterer physically abused and humiliated many of these boys by ordering them to strip naked in front of their peers and striking them on their bare buttocks with a paddle. Wetterer's "favorites" among these homeless children fared even worse: he sexually molested them.

When the United States was frustrated in its efforts to extradite Wetterer for the crime of mail fraud stemming from his fund-raising efforts, the Government initiated this civil forfeiture action against his American bank accounts. This opinion embodies the Court's findings of fact and conclusions of law after a non-jury trial.

I. BACKGROUND

John Hugh Wetterer, a former Long Island resident, is a Vietnam War veteran who founded an orphanage in Guatemala City in 1976 called Mi Casa. Wetterer was assisted in financing the operation of the orphanage by the American Friends of Children ("AFC"), an organization he and several others founded on Long Island to raise money to serve the needs of children.

From 1976, when Wetterer opened Mi Casa, to 1988, AFC's treasurer, Daniel Mackey, sent Wetterer over one million dollars in donations to assist him in housing, clothing, feeding and educating the boys of Mi Casa. Mackey received these donations by mail at a Post Office box he set up and maintained for that express purpose in Massapequa, New York. He deposited the donations in the Chase Manhattan Bank of New York, and then, pursuant to Wetterer's instructions, made out checks payable to "John Wetterer" that were forwarded to Bank of America

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account no. 05616 in Miami, Florida. Wetterer made arrangements to transfer the money from Miami to Guatemala. Although the Bank of America account was maintained in the name of Mi Casa, Wetterer was the sole signatory on the account.

Wetterer sent newsletters about Mi Casa to his supporters in the United States and elsewhere, including France. These newsletters portrayed Mi Casa as a normal, well-run orphanage, where abandoned, impoverished and neglected boys were given a chance for a better life by receiving shelter, clothing, food, medical care and education. Included in these newsletters were envelopes for supporters to send donations to the Post Office box Dan Mackey maintained. Mackey received donations to Mi Casa in these envelopes as a result of the newsletters. In the newsletters, Wetter openly discussed the use of the mails to send financial or other support, repeatedly thanked donors for the financial support he received from them, and from time to time, mentioned the need for financial support.

In late 1987, one of the boys who lived at Mi Casa, Manuel Bravo, revealed to his American sponsor, Mary Tyre, that Wetterer had sexually molested him. A similar revelation was made several months later by another boy from Mi Casa, Leonel Piedrasanta, who also was staying with Mary Tyre, Mary Tyre, in turn, contacted the television news program Sixty Minutes, which, in the Fall of 1988, was preparing to air a complimentary segment on Mi Casa and the work of John Wetterer. Sixty Minutes hired its own expert, Dr. Simon Miranda, to evaluate these claims of sexual abuse. In late November 1988, Sixty Minutes journalist Diane Sawyer confronted Wetterer with the allegations of sexual abuse. Shortly thereafter, AFC stopped depositing donations in the Bank of America account and ended its financial support of Mi Casa. Wetterer then arranged to receive donations for Mi Casa through a Post Office box in Spring, Texas.

On February 19, 1989, Sixty Minutes aired its segment on Mi Casa, including Sawyer's interview with Wetterer and the allegations of sexual abuse. Wetterer denied the allegations of sexual abuse orally and in his newsletters. According to Mi Casa's records introduced into evidence as Def.Ex. W, during the period from January 4, 1989 through November 12, 1990, a total of approximately $1,111,073.69 in donations were sent to Wetterer and Mi Casa.

On September 14, 1990, a criminal complaint charging Wetterer with, among other crimes, mail fraud, was filed in the Eastern District of New York. On the same date, a warrant was issued for Wetterer's arrest. Wetterer was accused of knowingly devising a scheme or artifice to obtain money or property by false pretenses and representations and in using the U.S. mails to execute his scheme, in violation of 18 U.S.C. § 1341. On February 12, 1991, Wetter was indicted and charged with mail fraud and a related crime.

On January 22, 1991, the United States commenced this civil action, seeking the forfeiture of certain bank accounts held in the name of the Asociacion or Wetterer pursuant to 18 U.S.C. § 981. The in rem complaint listed as the alleged crimes underlying the basis for the seizure mail fraud, 18 U.S.C. 1341, and inducing a person to travel in interstate or foreign commerce for the purpose of engaging in criminal sexual activity, 18 U.S.C. § 2422. An arrest warrant in rem authorizing the seizure of the bank accounts was issued that same day.

On February 6, 1991, the Asociacion that allegedly operates Mi Casa filed a claim to the defendant funds, stating that these funds were deposited for the use and benefit of the Asociacion. On September 19, 1995, this Court found that the Asociacion is the alter ego of Wetterer and struck its claim. United States v. Funds Held in the Name or for Benefit of John Hugh Wetterer, 899 F.Supp. 1013 (E.D.N.Y.1995).

This case was tried by the Court beginning on February 19, 1997 and concluding on February 6, 1998.

II. THE FORFEITURE COMPLAINT

On January 22, 1991, the Government commenced this civil forfeiture action pursuant to 18 U.S.C. § 981, and seized the funds on deposit in Bank of America account number 05616 in the name of Mi Casa; Sterling Bank

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account number 907-103 in the name of Mi Casa; and Sterling Bank account CD 15590 in the name of John Wetterer. As of February 1997, the aggregate amount of money in these accounts is, according to the Government, the sum of $109,327.22.

The complaint alleges that these accounts were utilized in or constitute the proceeds of violations of federal law. It is alleged that Wetterer, the operator of an orphanage in Guatemala, "regularly and systematically molests and sexually abuses the minor boys who reside there." The complaint further alleges that Wetterer finances the operation of the orphanage, known as "Mi Casa," through contributions solicited throughout the United States and that "These solicitations are false and fraudulent insofar as Wetterer represents that 'Mi Casa' provides a healthy and stable environment for its residents, when, in fact, he molests and sexually abuses the boys who reside there." In sum, the complaint supports the forfeiture claim by the crime of money laundering--namely, engaging in financial transactions involving funds obtained by false mailed solicitations.

III. PRIOR PROCEEDINGS

At the time this action was commenced, an arrest warrant in rem authorizing the seizure of the bank accounts was issued. In response to the seizure, the Asociacion filed a claim to all funds seized. All of the seized accounts are in the name of the Asociacion except the Sterling Bank account number CD 15590, which is in Wetterer's name. The Asociacion contends that it is the owner and entitled to the money in the Wetterer account.

In response to the Asociacion's claims, the Government filed a motion to strike the claims on the ground of lack of standing. The Government also contended that the Asociacion could not file a claim for funds held in Wetterer's name because he was a fugitive and was disentitled to contest any matter in the forfeiture case. The Asociacion countered that it had standing because it was a legal entity separate from Wetterer, and that his acts could not be attributed to the Asociacion. In response, the Government then contended that the Asociacion was Wetterer's alter ego and a shell entity which he completely dominated and controlled in order to perpetuate his fraudulent scheme. Thus, the Government reasoned, since the Asociacion was Wetterer's alter ego, it was also disentitled to file a claim because of Wetterer's fugitive status.

The...

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