US v. One Single Family Residence

• Citation: 731 F. Supp. 1563
• Decision Date: 21 February 1990
• Docket Number: No. 88-0349-CIV.,88-0349-CIV.
• Parties: UNITED STATES of America, Plaintiff, v. ONE SINGLE FAMILY RESIDENCE LOCATED AT 6960 MIRAFLORES AVENUE, CORAL GABLES, FLORIDA, Also Known As Lot 10, in Block 14, of Cocoplum Section 2 Plat "B", According to the Plat Thereof, as Recorded in Plat Book 115, at Page 84 of the Public Records of Dade County, Florida, Together With All Buildings, Fixtures and Appurtenances Thereto and All Improvements Thereon, Defendant.
• Court: U.S. District Court — Southern District of Florida

731 F. Supp. 1563

UNITED STATES of America, Plaintiff, v. ONE SINGLE FAMILY RESIDENCE LOCATED AT 6960 MIRAFLORES AVENUE, CORAL GABLES, FLORIDA, Also Known As Lot 10, in Block 14, of Cocoplum Section 2 Plat "B", According to the Plat Thereof, as Recorded in Plat Book 115, at Page 84 of the Public Records of Dade County, Florida, Together With All Buildings, Fixtures and Appurtenances Thereto and All Improvements Thereon, Defendant.

No. 88-0349-CIV.

United States District Court, S.D. Florida.

February 21, 1990.

Stanley Beiley, Miami, Fla., for defendant Republic Nat. Bank.

Alan Dagen, Asst. U.S. Atty., Miami, Fla., for U.S.

MEMORANDUM OPINION

SCOTT, District Judge.

This controversy presents serious issues involving the civil forfeiture law, 21 U.S.C. § 881, and its impact upon lending institutions. It brings into play the duties and obligations of a commercial lending institution when unmistakable "red flags" have been raised as to the involvement of drug-related proceeds in a financial transaction. Concomitantly, it presents to the Court the duty to define the standard of conduct for lending institutions in such cases. We venture forward fully cognizant of this opinion's precedent-setting nature.

I. HISTORY OF THE CASE

The United States brings this in rem action¹ for forfeiture of real property located at 6960 Miraflores Avenue, Coral Gables, Florida.² The Government alleges that Indalecio Iglesias was the true owner of the property and that he has engaged in a continuing series of narcotics-related transactions in violation of 21 U.S.C. §§ 841(a)(1) and 846, resulting in over 100 million dollars in illegal proceeds. The Government further alleges that Iglesias used these illegal proceeds to purchase the defendant real property.

Thule Holding Corporation ("Thule"), a Panamanian corporation, filed its claim and answer as the record owner of the property. Initially, Thule alleged that it had no knowledge of any illegal activities related to the real property. However, shortly before trial, Thule executed a stipulation of settlement and consent to forfeiture.

Republic National Bank of Miami ("Republic") filed its claim and answer asserting an $800,000.00 lien interest in the real property pursuant to a mortgage and security agreement recorded September 30, 1987. The issues between Republic and the Government were tried to the Court on June 27 and 28, 1988. The questions litigated included probable cause, relation back and innocent ownership.

Following submission of the case, the Government moved to reopen the evidence, claiming that a previously undisclosed witness had critical evidence. After initially opposing the motion, Republic withdrew its opposition, provided that it could offer appropriate rebuttal evidence. That request was honored.

In October 1988, the trial resumed with the Government's witness, Rene J. Leonard, followed by a number of Republic's witnesses attacking Leonard's credibility and, thereafter, the Government's efforts to bolster his credibility. In light of the issues involved, the parties were provided ample opportunities to brief the multiple issues and they responded accordingly. Those memoranda have been quite helpful and counsel are commended. Our findings of fact and conclusions of law follow.³

II. PROBABLE CAUSE

A. Factual Background

1. Iglesias' Drug-Trafficking Activities

The Government called Drug Enforcement Administration ("DEA") Special Agent Lee Truesdale to establish probable cause.⁴ Truesdale testified about his investigation of Indalecio "Andy" Iglesias, based on intelligence gathered through conversations with the Federal Bureau of Investigation ("FBI"), Internal Revenue Service ("IRS") and Customs Service ("Customs").⁵

Special Agent Truesdale testified that, on December 10, 1980, Iglesias was arrested on board a vessel stopped by Customs in which 300 pounds of marijuana were found in a sealed compartment. In April 1981, Iglesias was arrested for possession of 3,000 pounds of marijuana and fined $10,000.00 by Bahamian officials.

Truesdale also offered evidence obtained through "reliable" confidential informants. These informants possessed first-hand knowledge of Iglesias's drug importation activities. The informants were involved in smuggling both marijuana and cocaine with Iglesias.

Through an informant, Iglesias began to import cocaine from Colombia into the United States. The informant estimated that Iglesias transported approximately 30,000 kilograms of cocaine between 1980 and 1985. Based upon his knowledge, the informant estimated that Iglesias earned 180 million dollars in drug profits between 1980 and 1985. This estimate was based upon Iglesias's charge per kilo ($6,000 to $9,000) for transportation multiplied by the number of kilos (30,000) transported over the five-year period. Iglesias had no legitimate source of income for this time period.

2. Iglesias' Acquisition of Miraflores

During this period between 1980 and 1985, while Iglesias was importing narcotics from Colombia, he was also purchasing expensive property in South Florida. The defendant property located at 6960 Miraflores Avenue, Coral Gables, Florida, was one such property.

In 1983, acting through Thule, a shell corporation, Iglesias purchased the Miraflores lot and partially-constructed residence. Between 1983 and 1984, through a series of agents and contractors, Iglesias continued construction on the Miraflores property. Iglesias and his wife were present at the site and supervised construction of the residence. Iglesias paid one contractor between $200,000 and $220,000 across this time period. This contractor was paid $7,000 to $9,000 every week or two weeks, in cash, carried in a briefcase. A second contractor was paid approximately $140,000. About 60% of these payments were in cash. After the house was constructed, Iglesias and his family were the only persons ever to reside at Miraflores.

3. Republic's Mortgage Interest

In August 1987, IRS agents contacted Inocente Hernandez concerning Iglesias. Shortly thereafter, Iglesias called Hernandez to find out whether the IRS had contacted him. Hernandez told Iglesias that the IRS had called to ask questions about Iglesias and the property at Miraflores. Alerted to the investigation, Iglesias immediately began his efforts to recoup his financial investment before possible Government action. Iglesias put the house up for sale and approached Miami lenders to secure a mortgage on the property.

Republic agreed to provide an $800,000 one-year balloon note on the property, which was appraised at $1.2 million. Once the loan was approved, Republic transferred the proceeds to the borrower's Swiss bank account. Iglesias had recently purchased an airplane ticket to Geneva. He has apparently fled the jurisdiction of the United States.

B. Legal Analysis

Republic contends that the Government has failed to show any nexus between the property seized and a particular drug deal. However, Republic "misunderstands the government's burden. The government need not trace the cash to specific transactions, or actually prove by a preponderance of evidence a substantial connection to drug dealing." United States v. $41,305.00 in Currency and Traveler's Checks, 802 F.2d 1339, 1343 (11th Cir.1986). The Government need only show probable cause to believe that "a substantial connection exists between the property to be forfeited and an illegal exchange of a controlled substance." United States v. Four Million, Two Hundred and Fifty-Five Thousand Dollars, 762 F.2d 895, 903 (11th Cir.1985) (citation omitted).

The Eleventh Circuit has recently stated the test as follows:

In demonstrating a substantial connection between the property and illegal drug transactions, the government is not required to show a relationship between the property and a specific drug transaction. The government's burden of demonstrating probable cause is less than prima facie proof but more than mere suspicion.

United States v. Four Parcels of Real Property in Greene and Tuscaloosa Counties, 893 F.2d 1245 (11th Cir.1990).⁶ In addition, probable cause may be based "wholly on circumstantial evidence, and that evidence may include facts learned after the actual seizure of the money."

$41,305.00, 802 F.2d at 1343. Applying these principles, the Court makes the following factual findings on the issue of probable cause:

1. The Miraflores lot, with the residence, was worth $1.2 million dollars.

2. Iglesias purchased the Miraflores property through Thule. Thule was a straw owner for Iglesias.

3. Iglesias paid a series of agents and contractors to build a luxury home on the Miraflores lot. The contractors were paid large sums of money, primarily in cash, in payments under $10,000, to avoid the currency reporting laws.

4. Iglesias and his wife were present at the site and supervised construction of the property. Iglesias and his family are the only persons who ever resided at the property.

5. Iglesias is a known drug-trafficker. He has previously been arrested and convicted on narcotics charges.

6. The Court accepts Special Agent Truesdale's testimony that Iglesias earned 180 million dollars from the illegal importation of narcotics during the relevant time-frame. Truesdale's testimony was based on his own investigation, statements of other investigating agents, and statements of a reliable confidential informant. The informant's statements were, in turn, corroborated by the statements of other informants with personal knowledge.

7. Iglesias had no legitimate source of income during this time.

8. Iglesias knew that he was under investigation by the IRS, and that the Miraflores property was part of this investigation.

9. As soon as Iglesias became aware of the investigation, he put the house up for sale, secured an $800,000 mortgage loan on the property, and sent the money to a Swiss bank account.

The Court finds that probable cause exists to believe that Iglesias bought the...