USA. v. Real Property Located at 22 Santa Barbara Dr.

• Citation: 264 F.3d 860
• Decision Date: 05 June 2001
• Docket Number: No. 99-57000,CLAIMANTS-APPELLANTS,PLAINTIFF-APPELLEE,99-57000
• Parties: (9th Cir. 2001) UNITED STATES OF AMERICA,, v. REAL PROPERTY LOCATEDAT 22 SANTA BARBARA DRIVE, DEFENDANT, AND ADALINE B. GARCIA; DARNELL GARCIA; MARK A. BORENSTEIN; OPINION TUTTLE & TAYLOR; OVERLAND, BERKE, WESLEY, GITS, RANDOLPHAND LEVANAS, A CALIFORNIA PROFESSIONAL CORPORATION,
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 860

264 F.3d 860 (9th Cir. 2001)

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, v. REAL PROPERTY LOCATEDAT 22 SANTA BARBARA DRIVE, DEFENDANT AND ADALINE B. GARCIA; DARNELL GARCIA; MARK A. BORENSTEIN; OPINION TUTTLE & TAYLOR; OVERLAND, BERKE, WESLEY, GITS, RANDOLPHAND LEVANAS, A CALIFORNIA PROFESSIONAL CORPORATION, CLAIMANTS-APPELLANTS.

No. 99-57000

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted June 5, 2001--Pasadena, California

Filed September 5, 2001

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Counsel Mark A. Borenstein, Shapiro, Borenstein & Dupont, Santa Monica, California, for the claimants-appellants.

John E. Lee, Assistant United States Attorney, Los Angeles, California, for the plaintiff-appellee.

Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding D.C. No. CV-89-03560-MLR

Before: Dorothy W. Nelson, Ferdinand F. Fernandez and Pamela Ann Rymer, Circuit Judges.

D. W. Nelson, Circuit Judge

Opinion by Judge D.W. Nelson

Claimants Adaline and Darnell Garcia and their attorneys appeal a judgment of forfeiture for the United States. They argue that the district court (1) erred by denying damages for the wrongful seizure of the Garcias' home; (2) abused discretion by dismissing the attorney-claimants' claims; (3) erroneously found probable cause for the seizure; (4) improperly admitted Swiss bank records in the probable cause hearing; (5) improperly limited the claimants' questioning of DEA and IRS agents; (6) abused discretion by refusing to grant the claimants' motion in limine to exclude evidence that Adaline Garcia was not an innocent spouse; (7) violated the claimants' due process rights; and (8) excessively fined the claimants in violation of the Eighth Amendment. The claimants further argue that if we order a remand, the case should be assigned to another district judge.¹ We affirm.

FACTS

The facts and procedural history of this case have a degree of complexity worthy of Jarndyce v. Jarndyce. On June 13, 1989, the government filed a complaint for forfeiture in rem against Darnell and Adaline Garcia's house in Rancho Palos Verdes, California, pursuant to 21 U.S.C. §§ 881(a)(6), which subjects to forfeiture the proceeds traceable to drug transactions. On the same day, the government filed a lis pendens in federal court, giving notice that the forfeiture action had commenced. On June 16, 1989, the United States Marshal seized the defendant property and filed a notice with the district court that "all persons claiming the said described defendant . . . file their Claims . . . with the Clerk of the United States District Court . . . within Twenty (20) days after date of first publication, or within such additional time as the Court may allow . . . ."

The forfeiture complaint alleged that Darnell Garcia, a DEA agent, had led a double life as a drug dealer and that he purchased his house with drug proceeds. More than nine years later, a probable cause hearing was held (the procedural history from 1989 to the present will be discussed below). DEA and IRS Special Agents Bradley Reed and Frank Fotinatos testified about what the government knew before the forfeiture complaint was filed.

According to Reed, the DEA's investigation began with allegations made against another DEA agent, John Jackson. First, the DEA took statements from two brothers, Larry and Anthony Goodman, who bought many kilos of cocaine from their brother-in-law, Sherman Lair. Larry Goodman said in 1986 that Lair told him that Jackson was the source of the cocaine and that Jackson had partners "who were involved with law enforcement, but he didn't know who they were." Larry Goodman later gave a videotaped deposition at Jackson and Lair's attorney's office recanting that statement, but he then told prosecutors that he was pressured into recanting and that his original statement was true.

Jackson was implicated in three thefts of cocaine and heroin. In the first theft, Jackson submitted one kilo of heroin to the drug evidence custodian at the DEA after his group seized it, but the heroin was discovered missing on or about October 5, 1984. Jackson and Darnell Garcia refused polygraph tests. Second, in January 1985, Jackson worked on a case involving the seizure of 15 pounds of heroin. Jackson transported the heroin from the site of the bust to the DEA office and was responsible for processing the drugs and submitting them to the evidence vault. When the DEA's lab weighed the drugs, however, three pounds were missing. Third, according to Anthony Goodman's statement to the DEA, Jackson and his partners acquired 150 kilograms of cocaine some time in 1985-86.

According to Reed, Anthony Goodman said that Lair told him that one of Jackson's partners "was a Mexican who acted black, and who was in the jewelry business. And that was just the perfect description of Darnell Garcia." Even though Garcia and Jackson were in different DEA groups, they were repeatedly identified as associating with each other. In March 1986, Garcia rented an apartment in downtown Los Angeles and always paid in cash. The security chief of the apartment building told investigators that Jackson was constantly visiting Garcia, as were Ron and Conway Waddy and their girlfriends. The Waddy brothers were indicted on cocaine and money laundering charges in 1987, and one girlfriend was later caught in possession of 42 kilos of cocaine after having spent the night at a hotel across the street from Garcia's apartment.

Anthony Goodman also told the DEA that Jackson and his partners were selling drugs to someone in New York City. The DEA focused its investigation on a New York drug dealer named Mahlon Steward. Telephone records linked Garcia to Jackson and Steward. Although Steward denied knowing Garcia, Steward's address book listed Garcia's initials and pager number. Steward's girlfriend, Stephanie Frye, told the DEA that she had met Garcia and knew he was trafficking drugs with Steward. She also testified that Jackson started sending drugs to Steward in 1983. Reed testified that Steward would often send packages of cash to Los Angeles and that one such package was sent to Garcia.

Soon after each of the three thefts of drugs, Jackson and Garcia (along with a third DEA agent, Wayne Countryman) made large deposits in Swiss banks with cashier's checks, often structured to evade reporting requirements. Garcia had opened a Swiss bank account in November 1983 with a deposit of twelve separate cashier's checks, all under $10,000, for a total of $100,000. After the October 1984 heroin theft, Garcia deposited $62,010 from November 1984 to January 1985. After the January 1985 theft of three pounds of heroin, Garcia deposited $70,000 in March and April 1985. After the theft of 150 kilograms of cocaine, Garcia made deposits of nearly $800,000 in March of 1986.

Travel agency records showed that Garcia, Jackson, and Countryman traveled extensively in Europe, including Switzerland. In March 1986, the three went to Zurich and deposited about $2 million. When Garcia traveled, he bought his tickets with cash and flew first class. In 1984, Garcia went to Germany and told a DEA colleague that he wanted to buy a Maserati or Lamborghini. Although Garcia claimed that his extra income derived from working in the jewelry business and smuggling gold for jewelry dealers, Reed testified that he earned at most $150,000 from such activities.

On May 18, 1987, Garcia transferred $420,000 from his Swiss bank account to a checking account in Santa Monica. Ten days later, he withdrew $556,000 from the Santa Monica account to pay for the defendant real property in Rancho Palos Verdes. Garcia had contracted to build the house in January 1986. The purchase price was $581,000. The $161,000 not traceable to the Swiss bank accounts derived from the sale of other properties and a CD purchased from the Santa Monica Bank, all of which were bought or improved with large amounts of unexplained cash. About eight months after they bought the house, the Garcias obtained a mortgage from Home Savings & Loan in the amount of $350,000, most of which was deposited into a bank account in Luxembourg.

After the government seized the house in June 1989, Adaline Garcia continued to live there until November 1989. On January 2, 1990, the government and claimants entered a stipulation to sell the house for no less than $1.1 million, pay off the mortgage owed to Home Savings of America, and deposit the net sales proceeds in an interest-bearing account, which would become the substitute res. The house was sold on April 22, 1991, for $1,070,000, and after paying the mortgage costs, back taxes, and other expenses, the substitute res amounted to $556,594.38. The Garcias' lawyers, who had recorded liens against the real property in October 1990, agreed to release their liens to allow for the sale of the property, on the condition that "the priority . . . and any rights this lien may have in connection with the Property will be preserved as against the sales proceeds as if the Property had not been sold." In October 1991, the attorneys recorded state court judgments for fees owed by the Garcias.

The forfeiture action was stayed pending Darnell Garcia's criminal trial. Garcia was convicted on drug and money laundering charges in April 1991 and was eventually sentenced to 80 years in prison. United States v. Garcia, 37 F.3d 1359, 1362 (9th Cir. 1994). The district court then granted summary judgment for the government in the forfeiture action, finding that the criminal conviction established probable cause. The conviction covered the $420,000 wired from Swiss banks-which comprised 72 percent of the $581,000 purchase price--so the district court awarded the government 72 percent of the sales price of $1,070,000 for a total of $770,400. Because the substitute res only comprised...