U.S. v. Derenak

• Decision Date: 23 November 1998
• Docket Number: No. 95-29-CR-T-17(B).,95-29-CR-T-17(B).
• Citation: 27 F.Supp.2d 1300
• Parties: UNITED STATES of America v. Michael J. DERENAK, et al.
• Court: U.S. District Court — Middle District of Florida

27 F.Supp.2d 1300

UNITED STATES of America v. Michael J. DERENAK, et al.

No. 95-29-CR-T-17(B).

United States District Court, M.D. Florida, Tampa Division.

November 23, 1998.

Robert E. O'Neill, Jeffrey J. Del Fuoco, U.S. Attorney's Office, Tampa, FL, for U.S.

Thomas H. Ostrander, Thomas H. Ostrander, P.A., Bradenton, FL, for Defendant, Michael J. Derenak.

ORDER ON MOTION TO SET ASIDE FORFEITURE & RETURN PROPERTY

KOVACHEVICH, Chief Judge.

This cause is before the Court on Defendant, Michael J. Derenak's, Motion to Set Aside Forfeiture and Return Property (Dkt.411), and the Government's Motion to Strike Defendant's Motion (Dkt.415).

FACTS

The following facts are relevant to the resolution of this motion:

1. On January 24, 1995, the Drug Enforcement Administration ("DEA") arrested Defendant, Michael Derenak ("Derenak"), for purchasing ten kilograms of cocaine from an undercover DEA agent. Pursuant to the arrest, the DEA took possession of $18,600.00 in United States currency and a 1977 Porsche automobile, which Derenak used to purchase the cocaine.

2. In post-Miranda statements to the DEA, Derenak admitted that the money belonged to his co-conspirator, Michael McConnell. Following the arrest, the DEA proceeded with administrative proceedings to forfeit the currency and the vehicle.

3. On February 14, 1995, a federal grand jury returned an indictment against Derenak, charging him in Count One with conspiracy to distribute and possess with intent to distribute cocaine in violation of 21 U.S.C. § 846, and in Count Two with possession with intent to distribute cocaine in violation of 21 U.S.C. § 841(a)(1) and 18 U.S.C. § 2.

4. DEA computerized records show that five forfeiture notices were mailed to Derenak: 1) on February 21, 1995, notice was mailed to the Polk County Jail in care of Derenak's inmate number; 2) on April 3, 1995, notice was given to the United States Marshal's Service after Derenak had been transferred from Polk County Jail to the Marshal's custody; 3) also on April 3, notices were mailed to Derenak's three prior residential addresses. These computerized records were introduced and received as Government's Exhibit 1 in an evidentiary hearing on March 29, 1996.

5. On April 17, 1995, co-conspirator McConnell pled guilty. Pursuant to a plea agreement, McConnell agreed to forfeit the $18,600.00 used to purchase the cocaine.

6. On May 18, 1995, the DEA summarily forfeited the Porsche automobile pursuant to administrative forfeiture proceedings.

7. On August 8, 1995, the Porsche automobile was sold at auction for $3,600.00.

8. On March 29, 1996, in an evidentiary hearing regarding Derenak's Request for Immediate Postrestraint Adversary Hearing to Release Assets Needed to Hire Private Counsel, Derenak was made aware of the forfeiture of the Porsche and currency. Testimony in the hearing also established that Derenak had been in government custody since January 24, 1995. At the conclusion of the hearing, the Court determined that probable cause existed for the forfeitures because they were used in a drug transaction, (Dkt. 337 at 27), but the Court did not address the issue of whether the forfeiture was procedurally proper. (Dkt. 337 at 29).

9. On July 1, 1998, Derenak filed a Motion to Set Aside Forfeiture and Return Property Seized from Defendant, alleging that the forfeiture was procedurally improper.

STANDING

To have standing to contest forfeiture under 21 U.S.C. § 881(a)(6), the Eleventh Circuit has stated that a claimant must demonstrate an "`ownership or possessory interest in the property seized.'" United States v. Four Million, Two Hundred Fifty-Five Thousand, 762 F.2d 895, 907 (11th Cir.1985) (quoting U.S. v. Five Hundred Thousand Dollars, 730 F.2d 1437, 1439 (11th Cir.1984)). A claimant must come forth with more than a mere allegation of ownership. See Torres v. $36,256.80 U.S. Currency, 25 F.3d 1154, 1158 (2d Cir.1994); United States v. $38,570 U.S. Currency, 950 F.2d 1108, 1113 (5th Cir.1992). The claimant must "submit some additional evidence of ownership along with his claim in order to establish standing to contest forfeiture." $38,570 U.S. Currency, 950 F.2d at 1113.

Pursuant to this standard, the Court finds that Derenak does not have standing to contest the forfeiture of the $18,600.00. Derenak has not come forth with any evidence that he had any ownership interest in the money. On the contrary, the evidence shows that in a post-Miranda statement to the DEA, Derenak admitted that the money actually belonged to Michael McConnell, an alleged co-conspirator. (Dkt. 415 at 1). In the evidentiary hearing on March 29, 1996, Derenak also never contested the fact that the money actually belonged to McConnell. (Dkt. 337 at 28-29). Because Derenak has failed to meet his burden of coming forth with some additional evidence that he had an ownership interest in the money, the Court concludes that Derenak has no standing to contest the forfeiture of the $18,600.00. See U.S. v. Three Hundred Sixty Four Thousand Nine Hundred Sixty Dollars [$364,960.00] in U.S. Currency, 661 F.2d 319, 326 (5th Cir. 1981) (holding that "a party seeking to challenge the government's forfeiture of money or property used in violation of federal law must first demonstrate an interest in the seized item sufficient to satisfy the court of its standing to contest the forfeiture").

With respect to the Porsche, however, the Court finds that Derenak does have standing to contest the procedures used in its forfeiture. Testimony in the evidentiary hearing established that Derenak held title to the Porsche when he used it as partial payment for the cocaine. (Dkt. 337 at 11). Moreover, the Government does not dispute that Derenak was in fact the legal owner of the Porsche at the time the cocaine deal transpired. The Court concludes, therefore, that Derenak has met the minimum threshold requirements to have standing to contest the Porsche's forfeiture. Accordingly, the following discussion will be limited to the procedures the DEA used to forfeit the Porsche only, and not the $18,600.00.

DISCUSSION

Defendant Derenak contends that he never received the requisite notice from the DEA that his property, a 1977 Porsche automobile was subject to forfeiture pursuant to 21 U.S.C. § 881. Accordingly, Derenak asserts that the DEA forfeited his property without due process of law as required by the Fifth Amendment of the United States Constitution. The Government contends that Derenak's motion should be stricken because federal courts lack jurisdiction to review the merits of the DEA's administrative forfeiture decision; or in the alternative, Derenak's motion should be treated as a motion for return of property under Fed.R.Cr.P. 41(e), and as such should be time-barred by this Court's Order dated February 27, 1995. (Dkt. 10 at 3) (requiring all motions to be filed within twenty-one days).

Civil Forfeiture

A. Background

Federal law recognizes two basic types of forfeiture proceedings: civil and criminal. Criminal forfeiture, governed by 21 U.S.C. § 853, is an in personam action against the alleged criminal. Criminal forfeiture proceedings commence only after a criminal conviction. See 21 U.S.C. § 853(a). Civil forfeiture, however, may occur without regard to a criminal conviction and is governed by 21 U.S.C. § 881. Unlike criminal forfeiture, civil forfeiture is an in rem action directly against the subject property. These civil forfeitures are descendants of the deodand. "At common law the value of an inanimate object directly or indirectly causing the accidental death of a king's subject was forfeited to the Crown as a deodand. The origins of deodand are traceable to Biblical and pre-Judeo-Christian practices, which reflected the view that the instrument of death was accused and that religious expiation was required." Austin v. United States, 509 U.S. 602, 611, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993) (quoting O. Holmes, The Common Law, C. 1 (1881)). Conceptually, civil forfeiture is not punishment for the alleged criminal, but an action directly against the guilty property. Derenak's motion contests a civil forfeiture under § 881.

B. Civil Forfeiture Procedure, Notice, & Default

Section 881(a)(4) provides that "[a]ll conveyances, including aircraft, vehicles, or vessels, which are used, or are intended for use, to transport, or in any manner to facilitate the transportation, sale, receipt, possession, or concealment of property" that constitutes a controlled substance may be civilly seized and forfeited. Two forms of civil forfeiture procedures are available to the Government: an administrative procedure, see 21 C.F.R. § 1316.77, or a judicial procedure under 21 C.F.R. § 1316.78. For property valued at $500,000.00 or less, the Government may proceed under the administrative forfeiture procedure. See 19 U.S.C. § 1607(a); 21 U.S.C. § 881(d); 21 C.F.R. §§ 1316.75-77; Weng v. United States, 137 F.3d 709, 712 (2d Cir. 1998). Because the value of the Porsche was less than $500,000.00, the DEA proceeded under the administrative forfeiture procedure.

After a seizure, the administrative forfeiture procedure begins with the DEA publishing a notice of seizure and intent to forfeit the property. See 19 U.S.C. § 1607(a); 21 C.F.R. § 1316.75(a). Section 1316.75(a) provides that publication shall be accomplished by publishing the notice and intent to forfeit "once a week for at least 3 successive weeks in a newspaper of general circulation in the district in which the processing for forfeiture is brought." In addition to notice by publication, the DEA must also send "[w]ritten notice of seizure together with the information on the applicable procedures ... to each party who appears to have an interest in the seized article." 19 U.S.C. § 1607(a). Thus, two forms of notice are required: 1) notice by way of publication, and 2) actual written notice to a party having an interest in the property. See 19 U.S.C. § 1607(a); 21 C.F.R. §...