U.S. v. 1982 Yukon Delta Houseboat, E-35

Citation774 F.2d 1432
Decision Date25 October 1985
Docket NumberE-35,84-1843,Nos. 84-1790,s. 84-1790
PartiesUNITED STATES of America, Plaintiff-Appellant, v. 1982 YUKON DELTA HOUSEBOAT, Vin # YDH33930781; 1982 Yukon Delta Houseboat, Vin # YDH3543XM82; et al., Defendants, and Richard Dennis May, Linda Dianne Watson and Ray-May Corporation, Claimants-Appellees. UNITED STATES of America, Plaintiff-Appellee, v. A CONDOMINIUM LOCATED AT 3467 # D, NIGHTFLOWER LANE, LAS VEGAS, NV, Further Described As Unit # 68, Lot Q, Recorded in Book 1463, # 1422453, in the Office of the County Recorder, Clark County, Nevada, Defendant, and Richard Dennis May and Linda Dianne Watson, Claimants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Barry Lieberman, Asst. U.S. Atty., Las Vegas, Nev., for appellant.

Morgan C. Taylor, Felton, Cal., for appellee.

Appeal from the United States District Court for the District of Nevada.

Before DUNIWAY and CHOY, Senior Circuit Judges, and FARRIS, Circuit Judge.

OPINION

CHOY, Senior Circuit Judge:

In two separate suits, consolidated for this appeal, the United States government seeks forfeiture, under 21 U.S.C. Sec. 881(a)(6), of ten houseboats and a condominium it claims were bought with the money received from illegal controlled substance transactions. We reverse and remand as to each appeal.

In the suit for the houseboats, the government contends that convicted drug trafficker Ray Parker (a/k/a Richard Bostic and Steven Dubos) used such money to purchase the ten houseboats, but that he got claimant Richard Dennis May to front for him, designating May's company, Ray-May Corp. (d/b/a R & D Boat Sales), as the nominal owner of the houseboats.

Under 19 U.S.C. Sec. 1615, the burden of proof in this forfeiture proceeding is on the claimants (Richard Dennis May, his wife, and Ray-May Corp.), provided that the government first shows probable cause to institute the forfeiture action. The district court held that the government had failed to establish probable cause and ordered that the seized houseboats be returned to the claimants. The court also refused to issue a certificate of reasonable cause under 28 U.S.C. Sec. 2465. The government appeals.

In the separate suit for the condominium, the government alleged in its complaint, filed on May 26, 1982, that the claimants, Richard Dennis May and his wife, purchased the condominium with cash from illegal drug sales. An arrest warrant against the condominium was issued. The claimants were served with the warrant, the complaint, and a court order directing interested persons to file a verified claim to the condominium by August 9, 1982.

On June 16, 1982, the claimants filed an answer to the complaint, identifying themselves as owners of the condominium and admitting the government's allegation that they were the purchasers of the condominium. They did not, however, file a verified claim to the property. Rule C(6) of the Supplemental Rules for Certain Admiralty and Maritime Claims states that:

The claimant of property that is the subject of an action in rem shall file his claim within 10 days after process has been executed, or within such additional time as may be allowed by the court, and shall serve his answer within 20 days after the filing of the claim. The claim shall be verified on oath or solemn affirmation, and shall state the interest in the property by virtue of which the claimant demands its restitution and the right to defend the action.

Over a year later, after the parties had completed discovery and the case had been set for trial, the government realized that a verified claim had not been filed. The government's attorney advised the claimants to file a verified claim and agreed not to oppose the late filing. The district court, however, denied the claimants' application for permission to file a verified claim, stating that there is no provision in the law for extending the time for the filing of said claims. It further noted that the claimants had not shown excusable cause for leave to file their claims late because they had had adequate notice of the need to file a timely verified claim. Judgment was entered for the United States. Claimants' motion for a new trial was denied and they appeal.

ISSUES
1) Did the district court in the first suit err in finding that the government had not

established probable cause for the forfeiture of the ten houseboats?

2) Did the district court in the second suit err in its decision rejecting the claimants' application for permission to file a verified claim?
Houseboats

We review a district court's probable cause determination in a forfeiture proceeding as a question of law. United States v. $93,685.61 In U.S. Currency, 730 F.2d 571, 572 (9th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 119, 83 L.Ed.2d 61 (1984).

The government can show probable cause that a seized item is subject to forfeiture on a "reasonable ground for belief," id. at 572, that the seized item was traceable to an illegal controlled substance transaction. 21 U.S.C. Sec. 881(a)(6). 1 This belief must be more than "mere suspicion," but can be created by less than "prima facie proof." 730 F.2d at 572.

Circumstantial evidence is sufficient to show probable cause. Id. at 572. In light of the evidence produced at trial, the district court erred in ruling that the government had not established a reasonable ground for belief that the houseboats were proceeds traceable to illegal narcotics transactions.

The most damaging direct evidence of the houseboats' connection to illegal drug money is the testimony from Drug Enforcement Administration ("DEA") Agent Moren and DEA informant Wilder. Wilder testified that Ray Parker told him that the R & D Boat Sales' houseboats were his (Parker's), and that May was "fronting" for him. Parker told Wilder that May was running the houseboats for him because Parker did not have a visible means of support other than his narcotics transactions and didn't want anything in his name. Wilder testified that Parker told him that all of his possessions, money and income were from dealing in narcotics.

Corroborating Wilder's testimony was Agent Moren who testified that Parker told him that he (Parker) owned several houseboats in Las Vegas, and that they were purchased with money received from selling narcotics. Because Wilder's and Moren's testimonies provided direct evidence that the seized houseboats were bought with money derived from illegal narcotics deals, they alone may be sufficient to establish the requisite reasonable ground for belief. Although such testimony may be hearsay, 2 the question of probable cause does not depend upon the admissibility of the evidence upon which the government relies, but only upon the legal sufficiency and reliability of the evidence. See United States v. One 56-Foot Motor Yacht Named the Tahuna, 702 F.2d 1276, 1283 (9th Cir.1983) (holding that probable cause may be established by otherwise inadmissible hearsay).

The reliability of the possibly hearsay testimony is buttressed by other non-hearsay corroborating evidence. 3 The fact that Parker was caught red-handed arranging for and carrying out a $150,000-plus cocaine purchase substantiates his own statements that his sole source of income was from narcotics transactions.

The following evidence strongly suggests that Parker was the actual purchaser of the houseboats that were bought in the name of Ray-May Corp.: Parker was actively involved in the negotiations for the purchase of the houseboats. He went to the offices of Yukon Delta (seller of the houseboats) and inquired about the houseboats and took one for a test ride. Although other payments for the houseboats were made by check from Ray-May Corp., Parker made a partial payment of $13,500 in cash consisting of $100 and $50 bills. May did not file income tax returns for 1979, 1980, and 1981, and had little verifiable income for 1980 and 1981. He could not remember whether he had received any large gifts from anyone. May claims he got the money to purchase the houseboats from a $150,000 loan from Ed Gromand. His credibility was questionable because his testimony at trial regarding the details of that purported loan were in some respects inconsistent with his prior deposition testimony. Furthermore, although he listed Ray-May Corp. assets as personal assets on various credit applications, he never listed any Gromand loan to Ray-May Corp. as a liability on those applications.

Although May testified at trial that the Gromand loan money was fully delivered to him prior to September 12, 1981, large sums of cash were deposited into Ray-May Corp.'s bank account between November, 1981 and March, 1982. He could not account for those deposits other than to say that they must have come from the Gromand loan, his safety deposit box, or his personal bank accounts. Finally, shortly after Parker was arrested for his cocaine transaction, May was caught in an adjacent hotel room flushing cocaine down the toilet.

The above evidence certainly gives rise to a reasonable belief that Ray-May Corp. lacked a source of funds to purchase the houseboats itself, and that Parker used the income he derived from illegal narcotics transactions to purchase the houseboats, but arranged for Ray-May Corp. to front for him and to be the nominal owner. 4

The district court clearly erred in finding that the government had not established probable cause. The judgment for the claimants is REVERSED and the case is REMANDED so that claimants may attempt to establish by a preponderance of the evidence 5 that the houseboats are not in fact proceeds traceable to illegal narcotics transactions. 6

Condominium

We hold that the district court erred in ruling that it had no discretion to extend the time for the filing of a verified claim, and in failing to consider all factors relevant to the exercise of that discretion.

Under Rule C(6) of the Supplemental Rules for Certain Admiralty and...

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