U.S. v. $515,060.42 in U.S. Currency

Decision Date14 August 1998
Docket NumberNos. 95-6579,96-6175 and 97-5016,96-6057,s. 95-6579
Citation152 F.3d 491
PartiesUNITED STATES of America, Plaintiff-Appellant (95-6579; 97-5016), v. $515,060.42 IN UNITED STATES CURRENCY, Defendant-Appellee, Ralph E. White; E.M. Jellinek Center, Inc., Claimants-Appellees. UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant (96-6175), v. $515,060.42 IN UNITED STATES CURRENCY; Virginia Hurst, Defendants, Ralph E. White; E.M. Jellinek Center, Inc., Claimants-Appellants (96-6057)/Cross-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Robert E. Simpson (argued and briefed), Office of the U.S. Attorney, Knoxville, TN, for United States of America in Nos. 96-6057 and 96-6175.

Robert E. Simpson (argued and briefed), Office of the U.S. Attorney, Carl K. Kirkpatrick, U.S. Atty., Knoxville, TN, for United States of America in Nos. 95-6579 and 97-5016.

Herbert S. Moncier (argued and briefed), Knoxville, TN, for Ralph E. White.

James S. MacDonald (argued and briefed), Dunn, MacDonald & Coleman, Knoxville, TN, for E.M. Jellinek, Inc.

Before: KEITH, BOGGS and COLE, Circuit Judges.


COLE, Circuit Judge.

This consolidated appeal arises from a civil forfeiture proceeding in which the district court dismissed the Government's action against certain currency seized as part of a federal investigation of Tennessee bingo game operations based on the Government's failure to file the action within the five-year statute of limitations period. The Government appeals that decision as well as the district court's award of interest on the seized currency. The Government additionally challenges the claimants' standing. The claimants appeal the district court's denial of attorney's fees. For the reasons that follow, we affirm the district court in part and reverse and remand in part.


This case arises out of a seizure of currency which occurred as part of a federal investigation of bingo game operations in Tennessee. On October 17, 1989, pursuant to a federal search warrant, agents of the Internal Revenue Service ("IRS") and the Federal Bureau of Investigation ("FBI") searched the residence of Virginia Hurst, a target of the investigation, in Knoxville, Tennessee. Hurst operated bingo games in the Knoxville area for several charitable organizations, which were exempted by statute from Tennessee's gambling laws. 1 In the search of her home, agents seized $702,926.81 in United States currency 2 and on March 14, 1994, the Government initiated a civil forfeiture action against $515,060.42 of the seized currency. 3 In its complaint, the Government alleged that the $515,060.42 in United States currency was used to commit and facilitate the commission of an illegal gambling business in violation of Tennessee and federal law and that the defendant currency was thus subject to forfeiture.

The multi-target federal investigation of Tennessee bingo operations began in the spring of 1988. It produced several indictments, as well as the 1990 convictions in the United States District Court for the Middle District of Tennessee of Virginia Hurst, Sam T. Burnett, a former member of the Tennessee legislature, and Eddie E. Schutt. See United States v. Hurst, 951 F.2d 1490 (6th Cir.1991) (affirming convictions). Hurst, Burnett and Shutt were convicted of conspiracy to conduct an illegal gambling business as well as the substantive violation of conducting an illegal gambling business during late 1986 and early 1987; Burnett was also convicted of mail fraud. Pursuant to a plea agreement, Hurst was also convicted in March 1993 in the United States District Court for the Eastern District of Tennessee of conducting illegal gambling operations from about February 1987 through September 1987. It was not until one year after this second Hurst conviction that the Government initiated the underlying forfeiture action.

Back in February 1985, Hurst began operating bingo games for one of the claimant-appellants, E.M. Jellinek Center, Inc. ("Jellinek" or "the Jellinek Center"), a not-for-profit corporation in existence since 1971 that is involved in the rehabilitation of chemically dependent men. Hurst operated bingo games as often as six nights per week. The other claimant in this case, Ralph Edward White ("White" or "Eddie White"), lived at Hurst's residence and worked for Hurst "calling" bingo games. At the end of the night when bingo games were over, Hurst would take the bingo proceeds home with her. After determining Jellinek's proceeds, Hurst would turn over Jellinek's share of the proceeds (including cash and checks) to Frank Kolinsky, the executive director of the Jellinek Center.

Grand jury testimony was taken in the fall of 1988 as part of the previously mentioned federal investigation. Among those who testified before the grand jury in September 1988 were Kolinsky, who presented to the grand jury five banker boxes containing all of Jellinek's business records related to Hurst's bingo operations; and White, who gave extensive testimony about, inter alia, the Jellinek bingo operations, his role, Hurst's management role, and how the money was handled, including the fact that Hurst consistently took bingo proceeds home and kept them at her residence. 4 Kolinsky also testified regarding Hurst's activities in conducting bingo for Jellinek. Kolinsky testified to the grand jury that Hurst was in charge of the entire operation of the bingo games which generated funds for Jellinek. He also answered questions regarding the handling of proceeds, payment of bingo workers, the operator's integrity and financial transactions related to the bingo operation.

FBI and IRS agents interviewed various individuals in 1988, prior to the taking of grand jury testimony. These interviews included Virginia Hurst, Dorothy Varnell and Jim Long, a bingo products supplier and former bingo lobbyist. Long gave wide-ranging information concerning his knowledge of various East Tennessee bingo operations. Long explained that Hurst was one of the most successful bus-trip coordinators for the bingo games at the North Carolina Cherokee Indian reservation and that she was part of a plan to secure a state bingo permit for a new East Tennessee bingo operation under the name of a scholarship fund which was, in actuality, a planned "storefront" bingo operation. According to Long, Hurst was responsible for getting the operation up and running and for its management. He also explained her management role in several bingo operations. He additionally stated to investigating agents that during 1985 and 1986, Hurst paid Long $500 per month in cash skimmed from bingo games. Long also related Dorothy Varnell's role in falsifying a state bingo permit application, and Varnell herself also offered that story in her own interview with agents. Hurst was interviewed twice and the interviews covered her management role in several bingo operations. In addition, in August 1988, IRS agents taped (with the consent of one of the parties) at least two conversations between Varnell and Hurst, in which the two discussed their falsification of information on the application for a state bingo permit and the subpoenaing of grand jury witnesses, including Varnell. Varnell also testified to the grand jury in September 1988 regarding the events surrounding the bingo permit application.

In August 1988, the Government was aware that Hurst's residence was robbed of a sum of money that month. The Government was also aware at the time that the grand jury was convened that Hurst was robbed one evening of $5000 in cash while leaving a bingo site.

At the forfeiture hearing, Karen Bjorkman, an IRS special agent involved in the investigation whose affidavit supported the search warrant, testified that by the fall of 1988, she knew that a number of bingo operators were skimming money from illegitimate bingo games and were keeping at their residences skimmed cash and records that could be used in financial investigations to determine the total amount of income not reported to the IRS. Bjorkman also testified in the forfeiture hearing that she knew in September 1988, as a result of the grand jury testimony that proceeds were being taken to Hurst's residence nightly, that money and records would likely be found at the residence.

Following the Government's filing of a complaint against the defendant currency in March 1994, the claimants in this case, the Jellinek Center and Eddie White, filed verified claims. The district court set the forfeiture action for trial and selected a jury, but prior to the start of trial in early October of 1995, the district court conducted a hearing addressing the claimants' assertion that the statute of limitations barred the Government's action. It concluded that the five-year statute of limitations did indeed bar the action and dismissed the action. The district court reasoned that the Government had discovered the offenses by September 1988 and thus the five-year limitations period had expired.

Following its dismissal on statute of limitations grounds, the district court also decided issues raised on Fed.R.Civ.P. 59(e) motions by the parties for reconsideration or relief from judgment. The claimants filed a Rule 59(e) motion for "pre-judgment interest" on the seized funds as well as for attorney's fees. The district court granted the interest and denied the attorney's fees. In addition, the district court summarily denied the Government's Rule 59(e) motion to reconsider, in which, along with the issues already mentioned, the Government raised the issue of the claimants' standing. The parties subsequently appealed and cross-appealed to this court. The district court stayed the return of the seized currency pending the Government's appeal to this court.

I. The Claimants' Standing

We address first the issue that the Government raised to the district court last: the...

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